Legislature(2003 - 2004)

04/29/2004 12:27 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 29, 2004                                                                                           
                         12:27 P.M.                                                                                             
                                                                                                                                
TAPE HFC 04 - 102, Side A                                                                                                       
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House Finance Committee meeting                                                                    
to order at 12:27 P.M.                                                                                                          
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Hugh Fate                                                                                                        
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
                                                                                                                                
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Reggie Joule                                                                                                     
                                                                                                                                
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Ian  Fisk, Staff  to Senator  Stedman;  Cheryl Sutton,  Joint                                                                   
Legislative  Industries   Task  Force;  Joe   Balash,  Staff,                                                                   
Senator   Gene   Therriault;   Frank   Homan,   Commissioner,                                                                   
Commercial Fisheries  Entry Commission; Don  Bremner, Central                                                                   
Council Business and Economic Development, Juneau                                                                               
                                                                                                                                
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
None                                                                                                                            
                                                                                                                                
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
CSSB 273(FIN)                                                                                                                   
                                                                                                                                
          An  Act amending the  size, membership,  and powers                                                                   
          of  the board  of directors  of the Alaska  Seafood                                                                   
          Marketing  Institute  and  making  a  corresponding                                                                   
          change in  the quorum requirement;  authorizing the                                                                   
          establishment  of the seafood marketing  assessment                                                                   
          at a rate of 0.5     percent or 0.6 percent  of the                                                                   
          value of  seafood products produced;  providing for                                                                   
          an election  to retain, terminate, or  increase the                                                                   
          seafood  marketing  assessment; providing  for  the                                                                   
          repeal of  the salmon marketing tax  and provisions                                                                   
          related to the salmon  marketing tax; and providing                                                                   
          for an effective date.                                                                                                
                                                                                                                                
          CS SB 273 (FIN) was SCHEDULED but not HEARD.                                                                          
                                                                                                                                
CSSB 286(FIN)                                                                                                                   
                                                                                                                                
          An  Act  relating  to  direct  marketing  fisheries                                                                   
          businesses,  to the fisheries business  tax, and to                                                                   
          liability for  payment of taxes and  assessments on                                                                   
          the  sale or  transfer  of fishery  resources;  and                                                                   
          providing for an effective date.                                                                                      
                                                                                                                                
          CSSB 286  (FIN) was reported out of  Committee with                                                                   
          a "do pass" recommendation  and with fiscal note #1                                                                   
          by the  Department of Revenue  and zero note  #2 by                                                                   
          the Department of Fish & Game.                                                                                        
                                                                                                                                
SB 315    An Act relating to the administration of                                                                              
          commercial fishing entry  permit buy-back programs.                                                                   
                                                                                                                                
          SB  315 was reported  out of  Committee with  a "do                                                                   
          pass" recommendation  and with zero note  #1 by the                                                                   
          Department of Fish & Game.                                                                                            
                                                                                                                                
SB 322    An Act relating to the rate of the salmon                                                                             
          enhancement tax.                                                                                                      
                                                                                                                                
          SB  322 was reported  out of  Committee with  a "do                                                                   
          pass"  recommendation and with  a new zero  note by                                                                   
          the Department of Revenue.                                                                                            
                                                                                                                                
CS FOR SENATE BILL NO. 286(FIN)                                                                                               
                                                                                                                                
     An   Act   relating  to   direct   marketing   fisheries                                                                   
     businesses,  to  the  fisheries  business  tax,  and  to                                                                   
     liability  for payment of  taxes and assessments  on the                                                                   
     sale  or transfer  of fishery  resources; and  providing                                                                   
     for an effective date.                                                                                                     
                                                                                                                                
IAN FISK, STAFF, SENATOR STEDMAN, stated that the bill had                                                                      
been brought forward at the request of the Salmon Task                                                                          
Force.                                                                                                                          
                                                                                                                                
Representative Foster MOVED to  report CS SB 286 (FIN) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal notes.  There  being NO OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CSSB  286 (FIN)  was reported  out  of Committee  with a  "do                                                                   
pass"  recommendation   and  with  fiscal  note   #1  by  the                                                                   
Department of Revenue  and zero note #2 by  the Department of                                                                   
Fish & Game.                                                                                                                    
                                                                                                                                
SENATE BILL NO. 322                                                                                                           
                                                                                                                                
     An Act relating to the rate of the salmon enhancement                                                                      
     tax.                                                                                                                       
                                                                                                                                
CHERYL  SUTTON,  JOINT  LEGISLATIVE  SALMON  INDUSTRIES  TASK                                                                   
FORCE, SENATOR BEN  STEVENS, stated that SB  322 would modify                                                                   
AS 43.76  by adding additional tax  rates of 30, 20,  15, 10,                                                                   
9, 8, 7, 6, 5, and 4 percent to the Salmon Enhancement Tax.                                                                     
                                                                                                                                
Under current  law, commercial  salmon interim-use  and entry                                                                   
permit   holders   organized   under   regional   aquaculture                                                                   
associations  (AS 16.10.380)  may vote  to tax themselves  at                                                                   
the rate of one,  two or three percent of the  value of their                                                                   
harvest.   Those monies  are collected  by the Department  of                                                                   
Revenue   and  deposited   into  the   general  fund.     The                                                                   
Legislature may make appropriations  based on that deposit to                                                                   
the  Department of  Community  and Economic  Development  for                                                                   
financing of qualified regional aquaculture associations.                                                                       
                                                                                                                                
Ms. Sutton continued, the decline  in the value of salmon due                                                                   
to changing  market dynamics has  led to increased  costs for                                                                   
regional aquaculture  associations.   In order to  meet their                                                                   
continuing  costs, many  have  increased the  amount of  fish                                                                   
harvested  for "cost-recovery."    Fishermen  would like  the                                                                   
opportunity to raise their tax  rate to avoid increased cost-                                                                   
recovery harvests.                                                                                                              
                                                                                                                                
Qualified regional aquaculture  associations are permitted in                                                                   
statute (AS 43.76.015)  to conduct an election  to approve or                                                                   
terminate  a Salmon Enhancement  Tax.   The statute  requires                                                                   
approval  by a  majority  vote  of the  eligible  interim-use                                                                   
permit and  entry permit holders  voting in an election.   SB                                                                   
322  provides  some  flexibility   for  regional  aquaculture                                                                   
associations to organize their  operations and respond to the                                                                   
changing conditions in the salmon industry.                                                                                     
                                                                                                                                
Representative   Hawker  understood   that  the   aquaculture                                                                   
associations  would give  up cost  recovery  fishing and  the                                                                   
funds that would be generated  by that would be replaced with                                                                   
a self assessed  tax on the members or the  people benefiting                                                                   
from the enhancement activity.   He inquired the advantage to                                                                   
the fishermen moving to a tax structure.                                                                                        
                                                                                                                                
Ms. Sutton responded  that during interim  testimony received                                                                   
from  fishermen,   it  was  perceived   that  they   felt  in                                                                   
competition  with  the regional  aquaculture  association  in                                                                   
terms of fish  harvested and cost recovery.   She stated that                                                                   
it was a  requested tool.   Because it would not  mandate any                                                                   
change, Senator Stevens obliged them.                                                                                           
                                                                                                                                
Representative  Hawker asked if  there might  be a  risk that                                                                   
the  vote  could  eliminate  cost  recovery  fishing  at  the                                                                   
potential   expense   of   injuring   the   fishermen's   own                                                                   
aquaculture association.   Ms.  Sutton did not  believe there                                                                   
would  be  a  risk.   She  noted  that  Senator  Stevens  had                                                                   
considered  that  question before  he  agreed  to submit  the                                                                   
legislation.    She referenced  the  handout  on the  "Alaska                                                                   
Hatchery Commercial  Common Property  & Cost Recovery  Return                                                                   
Data,  1993-2003".   (Copy  on  File).    If the  program  is                                                                   
eliminated,  then   ultimately,  it  would  be   coming  from                                                                   
everyone's pocket and no one would be availed.                                                                                  
                                                                                                                                
Representative  Hawker  commented  that  with  cost  recovery                                                                   
fishing in a harvest area, there  are many dynamics involved.                                                                   
He   asked  if   the  legislation   would  disadvantage   any                                                                   
particular group.   Ms. Sutton  responded that it  would not,                                                                   
and  that  everything  else  would  remain  in  place.    The                                                                   
language removes nothing from law or regulation.                                                                                
                                                                                                                                
Representative Chenault asked  about the fiscal note analysis                                                                   
on Page  2:  "Individual regions  can significantly  increase                                                                   
compliance risk".  He asked why  that could potentially occur                                                                   
with a  percentage change  and how  that would then  increase                                                                   
costs  to the  Department.   Ms.  Sutton  commented that  the                                                                   
sponsor  agrees with  that point,  not viewing  the costs  as                                                                   
something that should  affect the Department's note.   If the                                                                   
tax rate  changes, Ms. Sutton  stated it would  be immaterial                                                                   
to the structure.   Representative Chenault  recommended that                                                                   
the note be zeroed  out.  Ms. Sutton commented  that the note                                                                   
is a  zero and is  a non-issue for  the bill.   The structure                                                                   
exists and the compliance view remains the same.                                                                                
                                                                                                                                
Representative  Chenault  stated  that  he did  not  want  to                                                                   
negatively  affect the  bill, however,  he did  not want  the                                                                   
Department to have the ability to gather more funds.                                                                            
                                                                                                                                
Representative  Fate  identified   the  30%  enhancement  tax                                                                   
contingent upon  the commissioner designating a  region.  Ms.                                                                   
Sutton disagreed.   The only thing that the bill  does is add                                                                   
additional tax  rates to a  law and structure  something that                                                                   
already exists.  It does not change anything else.                                                                              
                                                                                                                                
Representative  Fate pointed  out  that there  are areas  not                                                                   
included  in law.   Ms. Sutton  stated that  the only  people                                                                   
with the ability to vote to tax  are those that are qualified                                                                   
regional  aquaculture  association   members  established  by                                                                   
criteria  in law.     She added  that there  is nothing  else                                                                   
pending  that would  broaden  it.   There  are six  qualified                                                                   
regional aquaculture  associations.  The other  hatcheries do                                                                   
not qualify and do not have taxation powers.                                                                                    
                                                                                                                                
Representative Fate  did not know what an  Alaskan commercial                                                                   
common property hatchery was.   Ms. Sutton pointed out that a                                                                   
table  had  been  included  in  the  files,  which  indicates                                                                   
commercial comp property and cost  recovery return data.  All                                                                   
fish are common  property.  The chart indicates  the rates of                                                                   
harvest.  (Copy on File).                                                                                                       
                                                                                                                                
Representative  Foster   MOVED  to  report  SB   322  out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying zero fiscal note.   There being NO OBJECTION, it                                                                   
was so ordered.                                                                                                                 
                                                                                                                                
SB  322  was reported  out  of  Committee  with a  "do  pass"                                                                   
recommendation and with a new  zero note by the Department of                                                                   
Revenue.                                                                                                                        
                                                                                                                                
SENATE BILL NO. 315                                                                                                           
                                                                                                                                
     An Act relating to the administration of commercial                                                                        
     fishing entry permit buy-back programs.                                                                                    
                                                                                                                                
CHERYL  SUTTON,  JOINT  LEGISLATIVE  SALMON  INDUSTRIES  TASK                                                                   
FORCE,  SENATOR  BEN STEVENS,  stated  that  SB 315  was  the                                                                   
Senate companion  to HB 410.   It is precisely the  same bill                                                                   
as HB 410.  There have been no  amendments on the Senate side                                                                   
and  it passed  the  Senate  unanimously.   SB  315  modifies                                                                   
existing  law governing  buy-back programs.   It would  allow                                                                   
the Commercial  Fisheries Entry Commission to  "front fund" a                                                                   
buy-back  program if  an appropriation  were  received.   The                                                                   
commission would  then continue to collect funds  through the                                                                   
designated  rate of  assessment  in the  buy-back program  to                                                                   
"pay  back"  the  indebtedness.   She  added  that  when  the                                                                   
optimum number  of permits is  reached in a buy-back  and the                                                                   
reasonable  costs   of  the  program   have  been   met,  the                                                                   
Commission  would terminate  the assessment  in the  affected                                                                   
fishery.   SB 31 will make  the administration of  a buy-back                                                                   
program more workable.                                                                                                          
                                                                                                                                
Representative  Chenault asked  about  current law  buy-backs                                                                   
contained in the bill analysis.                                                                                                 
                                                                                                                                
FRANK   HOMAN,  COMMISSIONER,   COMMERCIAL  FISHERIES   ENTRY                                                                   
COMMISSION,   explained  that   current  law   is  that   the                                                                   
Commercial  Fisheries  Limited  Entry Commission,  after  the                                                                   
determination  of the  outcome  number and  when that  number                                                                   
indicates  too  many  permits  in  the  fishery,  a  buy-back                                                                   
program could  be established.   That language is  already in                                                                   
the fish  law.  It could  increase to 7%,  up to 1  through 7                                                                   
depending  on how  much  money  is needed  for  the buy  back                                                                   
program.                                                                                                                        
                                                                                                                                
Representative  Chenault asked if  it would be  voluntary, or                                                                   
would  the commission  make the  determination regarding  the                                                                   
optimum  number.   Mr.  Homan responded  that  it would  come                                                                   
about through the interaction with the fishing community.                                                                       
                                                                                                                                
Representative Chenault  pointed out that was  a concern with                                                                   
commercial  fishermen in his  area whether  or not  they were                                                                   
interested  in  a  buy-back.   These  fishermen  want  to  be                                                                   
"heavily  involved in  that process".    Mr. Homan  responded                                                                   
that there would be a public hearing process.                                                                                   
                                                                                                                                
DON   BREMNER,   CENTRAL  COUNCIL   BUSINESS   AND   ECONOMIC                                                                   
DEVELOPMENT,  JUNEAU,  voiced   opposition  to  the  proposed                                                                   
legislation.   He noted handouts  that support  his position.                                                                   
(Copy on  File).  Mr.  Bremner pointed  out that there  is no                                                                   
justification  or complete analysis  for the legislation  and                                                                   
how the  buy backs would affect  the fishermen.  He  spoke to                                                                   
finding  solutions   experienced  by  the  fishermen.     The                                                                   
fishermen  want to find  options.    Mr. Bremner  recommended                                                                   
that the State  should be looking at adding  back permits for                                                                   
the rural  communities, as it  is the only resource  for many                                                                   
of them.  He  reiterated that strong enough  reasons have not                                                                   
been addressed.                                                                                                                 
                                                                                                                                
Mr.  Bremner  noted  that  the Central  Council  sent  out  a                                                                   
proposal to  Senator Elton and  Senator Stevens  requesting a                                                                   
further look at  the proposal.  The proposal  suggests that a                                                                   
complete analysis  be performed of  the buy back  and limited                                                                   
entry systems.   He  did not know  how the legislation  would                                                                   
affect  the prices  to  the fishermen.    He reiterated  that                                                                   
special attention needs to be given to rural communities.                                                                       
                                                                                                                                
Mr.  Bremner  suggested that  the  permit  banks would  be  a                                                                   
better idea  for taking care  of future generations  and then                                                                   
they  would not  have  to come  back  to the  Legislature  to                                                                   
address these concerns.   Ms. Sutton commented  that the bill                                                                   
does not establish or promote any buy back.                                                                                     
                                                                                                                                
Representative Chenault  noted that he had no  fiscal note in                                                                   
his file.  Ms. Sutton said that was correct.                                                                                    
                                                                                                                                
Representative  Foster   MOVED  to  report  SB   315  out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
fiscal note.                                                                                                                    
                                                                                                                                
Mr. Homan  pointed out that  there was  a zero note  and that                                                                   
there would  be no  buy back and  that could  be used  if the                                                                   
State ever got  to that point.  The only thing  the bill does                                                                   
at this  time, is  indicate that  there could  be a  buy back                                                                   
program if there  was an opportunity to get  up-front funding                                                                   
from some  source, then the  legislation would allow  that to                                                                   
happen rather than waiting for years to accumulate an                                                                           
assessment.                                                                                                                     
                                                                                                                                
Representative Stoltze commented that there are options and                                                                     
that when the bill gets to the House floor, discussions                                                                         
should be made regarding these concerns.                                                                                        
                                                                                                                                
There being NO OBJECTION, SB 315 was reported out of                                                                            
Committee with a "do pass" recommendation and with zero note                                                                    
#1 by the Department of Fish & Game.                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 12:57 P.M.                                                                                         
                                                                                                                              
                                                                                                                                

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