Legislature(2015 - 2016)BILL RAY CENTER 208
05/03/2016 10:30 AM House FINANCE
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HOUSE FINANCE COMMITTEE May 3, 2016 10:31 a.m. 10:31:50 AM CALL TO ORDER Co-Chair Thompson called the House Finance Committee meeting to order at 10:31 a.m. MEMBERS PRESENT Representative Mark Neuman, Co-Chair Representative Steve Thompson, Co-Chair Representative Dan Saddler, Vice-Chair Representative Bryce Edgmon Representative Les Gara Representative Lynn Gattis Representative David Guttenberg Representative Scott Kawasaki Representative Cathy Munoz Representative Lance Pruitt Representative Tammie Wilson MEMBERS ABSENT None ALSO PRESENT Jerry Burnett, Deputy Commissioner, Treasury Division, Department of Revenue; Kevin Brooks, Deputy Commissioner, Department of Fish and Game; Forrest Bowers, Division Operations Manager, Department of Fish and Game; Bruce Twomley, Chairman, Commercial Fisheries Entry Commission; Representative Bob Herron; Representative Sam Kito III Representative Craig Johnson; Representative Paul Seaton; Representative Louise Stutes; Representative Lora Reinbold. PRESENT VIA TELECONFERENCE Benjamin Brown, Commissioner, Commercial Fisheries Entry Commission. SUMMARY HB 251 ELECTRONIC TAX RETURNS & FISHERIES TAXES CSHB 251 (FIN) was HEARD and HELD in committee for further consideration. Co-Chair Thompson reviewed the agenda for the day. HOUSE BILL NO. 251 "An Act requiring the electronic submission of a tax return or report with the Department of Revenue; relating to fisheries business tax and fishery resource landing tax; relating to refunds to local governments; and providing for an effective date." 10:32:35 AM Co-Chair Neuman MOVED to ADOPT the proposed committee substitute for HB 251 FIN, Work Draft 29-GH2921\E (Nauman, 4/28/16). There being NO OBJECTION, it was so ordered. JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION, DEPARTMENT OF REVENUE, introduced himself. KEVIN BROOKS, DEPUTY COMMISSIONER, DEPARTMENT OF FISH AND GAME, introduced himself. Mr. Burnett introduced the PowerPoint Presentation: "Fish Tax HB 251" (copy on file). He began with slide 2: "Bill Title": "An Act requiring the electronic submission of a tax return or report with the Department of Revenue; relating to fisheries business tax and fishery resource landing tax; relating to refunds to local governments; and providing for an effective date." Mr. Burnett advanced to slide 3: "Fish Business Tax Overview": · Paid by persons or business who process fish in Alaska or export fish from Alaska · Charged on price for raw resource or fair market value Mr. Burnett advanced to slide 4: "Fish Business Tax History": · Territorial "salmon pack tax" in 1913 · Tax base expanded to include other fish between 1913 and 1949 · Fish business license required in 1951 · Municipal sharing began in 1962 · Increased from 10 percent to 50 percent over time Mr. Burnett read from slide 5: "Fish Business Tax History (Continued)": · Current tax structure began in 2004 · Shore-based facility: · 1 percent for developing species · 3 percent for established species · Floating facility: · 3 percent for developing · 5 percent for established · Salmon cannery: 4.5 percent · Direct Marketing License holders pay shore-based rates Representative Wilson queried the difference between shore based and floating processing facilities. She wondered if one was on land and the other was not. Mr. Brooks replied in the affirmative. Representative Gara wondered if a direct marketer was a fisherman who sold directly to consumers in the lower 48 or restaurants. Mr. Brooks replied in the affirmative. 10:38:11 AM Mr. Burnett reviewed slide 6: "Fish Landing Tax Overview": · Levied on unprocessed value of a fishery resource first landed in Alaska, but processed outside · Value calculated using Statewide Average Price (SWAP) · Mainly factory trawlers and floating processors · 50 percent municipal sharing, like Business Tax Co-Chair Neuman asked about the difference between established and developing fisheries tax rates. Mr. Burnett responded that, over the years, certain new fisheries had not been identified as fisheries. He explained that the Department of Fish and Game (DFG) identifies fisheries as "developing fisheries" and reports to the Department of Revenue (DOR) the fishery distinctions. He stated that new fisheries were related to a new species or new use of a species that may not have been previously commercialized. Co-Chair Neuman queried a time limit on the determination. Mr. Brooks replied that there was established criteria in Title 16.05.050. Co-Chair Neuman queried a set rate or percentage of the collected money that would go into the department for commercial fisheries management. Mr. Brooks responded that the funding he was speaking of was UGF. He stated that there was no direct correlation with the revenue Mr. Burnett advanced to slide 7: "Fish Landing Tax History": · Effective 1994 · Initially 3.3 percent of the unprocessed value · Exception: Pollock subject to Landing Tax even if not landed in Alaska · Due to 1999 American Fisheries Act Representative Wilson wondered how much taxation that went to DFG would meet the spending. Mr. Brooks stated that the amount of tax revenue generated from development fisheries was minimal. He explained that it was only approximately $200,000 of $50 million. Representative Wilson asked whether he had a document that showed sustainable fisheries, or possible adjustments. Mr. Brooks referred to a couple of different approaches where the commercial fishing industry would pay for management programs within the department. He stated that there were test fish activities that generate revenues. 10:42:47 AM Representative Wilson was looking for other activities that did not generate revenue, and whether the state was paying for activities that did not generate revenue. Mr. Brooks responded that there agreement was based on dollar for dollar, so there was no extra profit. He explained that the reason for the 1 percent increase on the tax was targeting an $18 million revenue generation, because the current tax rates generated $50 million shared with municipalities. He stated that there was a community fish budget of approximately $35 million in UGF. He explained that part of the proposal was a recognition of the commercial fishing industry paying an additional tax rate to cover the cost of management related to commercial fishing in the state. Representative Gara wondered what would occur when a developing fishery was profitable. He noted that they were charged one-third the rate on shore-based processors; and one-half the rate on floating processors. Mr. Brooks replied that the criteria was in statute, and stated that once the fishery was contributing a significant portion of catch into revenue they would become an "established fishery" and pay the higher rate. Representative Gara queried the standard of an "established fishery." Mr. Brooks read the definition in statute. Mr. Burnett shared that the committee substitute showed that the tax rates for the developing fisheries were exactly the same as developed fisheries. Representative Gara remarked that the state had, historically, had a problem with dedicated taxes, because many services needed money. He stressed that the fishery tax stated that all the money to the state would go to fund the commercial fisheries division. He recalled that the commercial fisheries division required $35 million, and the state portion of the tax was $25 million. Mr. Brooks replied that all tax revenue generated from the existing taxes and proposed taxes were put into UGF for appropriation by the legislature. He stressed that the tax was not designated. Representative Gara asserted that it should be considered a dedicated tax. He remarked that there was $25 million in state fisheries taxes for a commercial fisheries department that cost the state $35 million. Mr. Brooks agreed, but reiterated that it was not a dedicated fund. Representative Gara felt that it was essentially a dedicated fund. 10:47:30 AM Vice-Chair Saddler asked about any other examples of developing fisheries. Mr. Brooks responded that there might be developing fishery in one part of the state and not another. He gave examples of developing fisheries. Representative Kawasaki remarked that the committee was well versed in how taxes were levied. He did not know if 3.3 percent was the appropriate level. He wondered why there was not a higher percentage on a specific stock of species, if the species was unique to the area. Mr. Burnett replied that most states did not have a fish tax for commercial fishing. He stated that Washington had rates that varied from 1 percent to 5 percent. He shared that California had taxes that were species-specific. He remarked that Alaska had a gross tax system. He stated that there could be rates on a species-specific or profit- specific basis. He restated that the current system was a gross tax system. He explained that the economics of each fisherman was probably different. The fish tax was collected by the state at the processor level. The processor deduct the value of the tax from the fish when the fish is purchased from the fisherman. He felt that constructing a tax that would be economically specific to each fisherman would be a difficult proposition. 10:51:19 AM Representative Edgmon asserted that the purpose of the bill was to create a process for the fishing industry to assist in closing the state's fiscal gap. Mr. Burnett replied in the affirmative. Representative Edgmon thought the discussion would morph into a discussion about commercial fishing industry, and whether it paid its way in Alaska. He wanted to ensure that the money would be directed toward narrowing the gap of general fund dollars that were used for paying for DFG. He wanted to discuss the formulation of the number. He remarked that, in its "hay day", the oil industry paid 90 percent of the state's UGF. He remarked that the fishing and mining industry had much smaller contributions to the state's treasury. He remarked that there had been third party expert analysts assist the state to better understand the cost and benefit of the oil, gas, and mining tax structure. He queried any expertise that DFG had hired to analyze the fish industry in the state. Mr. Burnett stated that the oil industry was a much greater portion of the state's revenue than the fishing industry. He remarked that the analysis was internal, and announced that there was expertise within DFG related to the different types of fisheries. There were economists in DOR who had examined the various parts of the proposal. He announced that there were no external consultants to analyze the proposal. Representative Edgmon announced that he wanted to ensure that all industry and groups would contribute to helping to fix the fiscal crisis in a fair manner. He stressed that the commercial fishing industry impacted the health and wellbeing of coastal Alaska and how it interacted with the transportation system in the state. 10:56:49 AM Vice-Chair Saddler found it difficult to assume that the current tax structure was the appropriate tax structure, especially when contemplating an increase by only 1 percent. He wondered if there was a royalty that the state collected on the value of the fish as the landholder of the sea holder's share. Mr. Burnett responded in the negative. He explained that the tax was a flat tax. Vice-Chair Saddler observed that the fisheries provided jobs and tax bases for rural economies. He stressed that the industry provided benefits to the state other than money to the general funds. Co-Chair Thompson asked members to focus their questions on the slides. Mr. Burnett continued to slide 8: "Distribution of Fish Tax Revenue." He stated that 50 percent of the tax went to communities and boroughs; and 50 percent went to the general fund and any costs or credits associated with the tax. He stated that the total collections of fish revenue was $44.4 million; the municipal share was $23.1 million; and the state retained $21.3 percent. He remarked that the revenue had varied year to year because of the price and amount of fish. Co-Chair Thompson queried more information about the municipal share. Mr. Brooks replied that the municipal share was one-half of what was owed on the tax returns before credits. Co-Chair Thompson wondered how the municipal share was divided among the communities. Mr. Brooks replied that an incorporated city in an organized borough received an equal contribution between the city and the organized borough. He stated that the tax was distributed through an allocation program to unincorporated boroughs or cities established by the Department of Commerce, Community and Economic Development (DCCED). 11:00:56 AM Representative Guttenberg pointed to the municipal share listed on the slide. He wondered whether there was compensation to the communities who were inland and effected by fishing. Mr. Burnett responded that under the current statutes, the sharing did not go outside the direct communities. The inland communities did not receive compensation. Representative Guttenberg asked if there was a balance of revenue to the other communities. Mr. Burnett replied in the negative, and felt that the legislature would need to reappropriate those funds. Representative Guttenberg asked for more information. Vice-Chair Saddler asked for a detail of the credits. Mr. Burnett stated that there would be credits issued to businesses that would add value to the produce. Vice-Chair Saddler queried the history of the credits and their cost-benefit analysis. Mr. Burnett agreed to provide that information. Co-Chair Thompson noted that the fish business tax revenue had municipal share. He wondered whether those communities receiving money from the community revenue sharing program. Mr. Burnett replied that the distribution did not change the other revenue sharing calculation. 11:05:51 AM Mr. Burnett introduced slide 9: "Fish Business Tax Revenue": FY 2015 Total collections: $44.4 million Municipal share: $23.1 million Retained by state: $21.3 million FY 2014 Total collections: $53.0 million Municipal share: $26.5 million Retained by state: $26.5 million FY 2013 Total collections: $45.1 million Municipal share: $25.0 million Retained by state: $20.0 million -State share normally smaller than municipal share because of credits Mr. Burnett moved on to slide 10: "Fish Landing Tax Revenue": FY 2015 Total collections: $8.4 million Municipal share: $3.2 million Retained by state: $5.1 million FY 2014 Total collections: $12.6 million Municipal share: $5.4 million Retained by state: $7.1 million FY 2013 Total collections: $13.4 million Municipal share: $7.8 million Retained by state: $5.5 million Representative Edgmon felt that all industries should be required to pay a little more in the current economic climate. He wondered how the numbers were derived, and noted that an internal process and deliberative process could yield different results. He also asked for more information regarding the relationship of cost and benefit. Mr. Burnett replied that the discussion took place within a working group, and the numbers were a result of the work in those discussions. He stated that the exact numbers were even numbers, which were easy for tax payers and administration. Representative Edgmon asked what kind of influence the fishing industry and the municipalities on the discussions. Mr. Brooks responded that the conversations did not include the fishing industry about specific tax rates. He remarked that there had been discussions about increased taxes, but not specific rates. 11:10:44 AM Representative Gara asked if the costs varied from different remarked that the cost of a crab fishery would be different than other types of fisheries. He wondered why there was not a profits-based tax. He felt that the numbers were arbitrary, because there was no difference in costs for the various types of fisheries. Mr. Burnett stated that the department was trying to maintain a certain level of simplicity for administration and tax paying purposes. He agreed that a proper economic impact on each business would be to have a profit-based tax. Representative Gara understood there was a balance in imposing taxes. He remarked that the state currently lost money on commercial fisheries, because it cost more to manage than the revenue. He stated that he wondered why the state did not close the loopholes in the corporate tax. Representative Munoz wondered if both taxes were required on a facility that was both cold-storage shore-based, and canning facility. She also asked whether that tax would be assessed on the individual operations. Mr. Burnett replied that he believed that if the facility purchased the fish for purpose of using it in their cannery business, it would be taxed at the cannery rate. He furthered that if the fish were purchased and selling as a frozen product, it would be taxed at the appropriate rate for that activity. Representative Munoz surmised that there were facilities that paid both types of taxes. Mr. Burnett responded in the affirmative. Representative Munoz wanted to ensure that the tax was not paying both taxes on one resource. Mr. Burnett replied that the tax would be applied to the activity not the fish. 11:14:40 AM Mr. Burnett scrolled through slide 11: "Fish Tax Proposal": · Increases Fisheries Business Tax and Fishery Resource Landing Tax by 1 percent for established species Mr. Burnett advanced to slide 12: "Fish Tax Proposal (Continued)": · 1 percent tax increase would be entirely state revenue, not shared with municipalities · New proposal establishes the Alaska Seafood Marketing Fund (ASMF) within the General Fund. DOR will separately account for .5 percent of the revenue and deposit into the fund. The ASMF would be subject to legislative appropriation to the Alaska Seafood Marketing Institute, and the funds would not lapse. · Raises from 1 percent to 4 percent developing species processed at a shore-based facility under fisheries business and developing species under fishery resource landing. · Municipal sharing would continue for remaining revenue · Requires electronic filing Mr. Burnett looked at slide 13: "Distribution Under New Fish Tax Proposal": Fish Tax Revenue Additional 1 percent of value directly to the General Fund 50 percent to communities and boroughs 50 percent to General Fund and credits 11:15:40 AM Representative Edgmon noted that many fishing districts were small industrial hubs located hundreds of miles from anywhere else, requiring a higher cost to conduct business. He remarked that those communities required additional services such as police and landfill. He felt that the capital budget could not meet the cost requirements for those services. He queried analysis on sharing the additional 1 percent at the same rate with the smaller communities. He felt that effort would lessen the demand on the capital budget; and would create viable local entities that could capture more revenue for the state. Mr. Burnett agreed that it was a good point. The administration had been looking to increase additional money to the general fund. He stressed that the legislature had the authority to appropriate money. Representative Edgmon announced that he would continue to raise his concern. Co-Chair Neuman stated the local communities also had the jobs in the communities, and extra economic activity that spurred other activities to support surrounding businesses. He stated that the municipalities had the ability to tax locally in organized areas. Mr. Burnett responded that the local governments had the ability to tax. Mr. Burnett looked at slide 14:"Distribution Under House Fisheries Tax Proposal": Fish Tax Revenue Additional 0.5 percent of value directly to the General Fund and 0.5 percent value directly to Alaska Seafood Marketing fund 50 percent to communities and boroughs 50 percent to general fund and credits Mr. Burnett discussed slide 15: "Relative Fish Tax Rate": · Washington is a state with a tax specific to fish · 0.09 percent to 5.62 percent of value at point of landing · Rate depends on species Representative Guttenberg asked if anything else to raise additional monies such as imposing dock fees Mr. Burnett wondered if he was talking about Washington. Representative Guttenberg greed. Mr. Burnett stated that the State of Washington heavily relied on state sales tax. Representative Guttenberg asked if there was a sales tax imposed on the tax. Mr. Burnett stated that people pay about a 10 percent sales tax 11:21:08 AM Co-Chair Neuman wondered whether the taxes paid to the Alaska were deductible from federal tax returns. Mr. Burnett responded in the affirmative. Co-Chair Neuman asked if there was a tax imposed on the fisheries industries would they be able to claim a write off. Mr. Burnett replied in the affirmative. Representative Gara asked that for the shore-based or floating based processor. Mr. Burnett responded that it did not necessarily apply to both processors. 11:26:38 AM Representative Munoz remarked that she thought a floating processor and the delivery were separate. Mr. Brooks deferred to Mr. Bowers. FORREST BOWERS, DIVISION OPERATIONS MANAGER, DEPARTMENT OF FISH AND GAME, explained that in Bristol many of the offshore floating processors are taking delivery and also processing. 11:32:53 AM Mr. Burnett read from slide 16: "Revenue Impact": · Dept. of Revenue estimates proposed fish tax increases would raise an additional $18 million per year · New proposal would raise an additional $7 million · Estimates are based on the fall 2015 revenue forecast · New proposal is based on the Spring 2016 revenue forecast 11:38:25 AM Co-Chair Neuman wondered whether the only tax on fisheries were on targeted species. Mr. Burnett replied in the negative. He stated that all commercial fish had a tax assessed at the point of sale. Co-Chair Neuman wondered whether the tax included non- targeted species such as shark. Mr. Brooks replied that there would be a tax if the fish was caught or sold, based on the value or actual price or purchase. Co-Chair Neuman remarked that he did not see a tax on a non-targeted species, such as catch that was dumped overboard. Mr. Burnett moved to slide 17: "Implementation Cost": · Would require the Department of Revenue to update its Tax Revenue Management System (TRMS) and Revenue Online (ROL) which allows a taxpayer to file a return online and update the current tax return forms. · One-time implementation cost of $100,000 to recreate tax forms and reprogram and test the tax system · Do not anticipate any additional costs to administer the tax program. 11:40:45 AM Mr. Burnett addressed slide 20 - 25: "Sectional Analysis": Sec. 1. Adds a $25 or 1 percent tax penalty for failure to file electronically unless an exemption is received by the taxpayer Sec. 2. Requires electronic submission of tax returns, license applications, and other documents submitted to the Department of Revenue. This changes the general tax statutes, AS 43.05, and will apply to all tax types administered by the department. Provides a process to request an exemption if a taxpayer does not have the technological capability to do so. Sec. 3. Increases three different tax rates within the Fisheries Business Tax by one percent. The current rates range from three to five percent. Sec. 4. Increases tax rate within the Fisheries Business Tax for developing fish species processed by a floating processor from 3 to 4 percent. Rate remains at 1 percent for developing fish species processed by a shore-based business. Sec. 5. Increases tax rate within the Fisheries Business Tax for direct marketers from 3 to 4 percent. Rate remains at 1 percent for developing fish species sold by direct marketers. Sec. 6. Conforming language related to the requirement to submit returns or reports electronically. This section deletes the requirement for taxpayers to submit their returns to the department in Juneau. Sec. 7. Establishes that the revenue from the one percent tax increase is deposited in the general fund. The remaining revenue shall be shared with municipalities per the currently existing formula. New Section 7-Establishes the Alaska Seafood Marketing fund in the general fund. DOR will account for and deposit .5 percent of the value of a fishery taxed. The fund is subject to legislative appropriation and funds do not lapse. Sec. 8. Increases tax rate within the Fisheries Landing Tax for fish species other than developing fish species from 3 to 4 percent. Rate remains at 1 percent for developing fish species. · Current Sec. 8 becomes the new Sec 9. New section 8-Tax amount equal to .5 percent of the value of fishery taxed will be deposited into the general fund. Sec. 9. Establishes that the revenue from the one percent tax increase is deposited in the general fund. The remaining revenue shall be shared with municipalities per the currently existing formula. · Current Sec 9 becomes the new Sec 10 Sec.10. Establishes that the revenue from the one percent tax increase is deposited in the general fund. The remaining revenue shall be shared with boroughs per the currently existing formula. New Sec 10-tax collected under AS 43.77.055 paid into separate account in the general fund, may be appropriated by the legislature for revenue sharing under AS 43.77.060. Sec. 11. Transitional language allowing for regulations. New Sec. 11-Separately account for and deposit .5 percent of the value of fishery taxed under AS 43.77.010(2) (fish landing/established) into the Alaska seafood marketing fund. Sec. 12. Section 11 above takes effect immediately. New Sec 12-Establishes that the revenue from the one percent tax increase is deposited in the general fund. The remaining revenue shall be shared with municipalities per the currently existing formula. 11:43:21 AM Co-Chair Neuman referred to Section 1, lines 10 through 13, which addressed the additional base fee by the commission. He noted that the subsection stated that a non-resident would pay an annual resident surcharge. He wondered whether there was a file for any of the Carlson versus State issues related to charging different rates for residents and non- residents. Mr. Brooks replied that the section complied with the Carlson Case. He explained that, every three years, OMB calculated a differential, updates the differential, and DOR assessed it against permits and licenses. Co-Chair Neuman wondered why the words were removed on page 2, lines 2 and 3. Mr. Brooks replied that it had not been an amendment put in by the department. Co-Chair Neuman asked about Section 7, he wondered how a person could own a fisheries resource. Mr. Brooks replied that it was existing language in statute. He believed that it was fish once it's caught. Co-Chair Neuman assumed that the captain of the boat owned the caught fish. Mr. Burnett noted that a fish that was caught outside of Alaska waters, was not under the state's jurisdiction when it was caught. Co-Chair Neuman asked about Section 8 and requested a chart showing the 50 percent municipal share was distributed. Mr. Burnett was happy to provide information to the committee. Co-Chair Thompson asked the department to provide the information to his office. Vice-Chair Saddler looked at slide 20, and assumed that the fisheries business tax under established fisheries. Mr. Burnett answered in the affirmative. Vice-Chair Saddler looked at Section 4, and wondered if "tax rate on direct marking value" was missing; or was it a proposed increase the actual marking value of the fish. Mr. Burnett replied that it was a typo. 11:48:16 AM Representative Pruitt asked if there were any ways to legally avoid paying the tax. Mr. Burnett responded that he did not know if any. Representative Pruitt asked for explanation about the attempt to hide taxes behind an LLC. Mr. Burnett replied that it was not unusual for a processor to pay commercial fisherman a set fee when fish were purchased in season. The tax was paid on the full payment. He remarked that there was a concern about the Representative Pruitt asked if there was something the legislature needed to do to "plug the hole?" Mr. Burnett did not think there was anything that had to be changed in the structure. 11:53:49 AM Vice-Chair Saddler referred to slide 19, and noted the assertion that the tax burden would not be passed down to the buyers. Mr. Burnett replied that the price was passed onto the commercial fisheries. Vice-Chair Saddler wondered whether "buyer" referred to the last buyer or the first buyer. Mr. Burnett replied that "buyer" referred to both the last and first buyer. Vice-Chair Saddler felt unsure about the assumption that the cost would not be passed down to the purchaser. He wondered why the buyer would not bear the cost of the tax increase. Mr. Burnett stated that in except for a few markets there was very little power to sell beyond what the market dictates. Representative Gara stated that he would like to look at a trawler tax. Co-Chair Thompson indicated that there would be a discussion regarding the portion of the bill that addressed the lifting of the CFEC cap. BENJAMIN BROWN, COMMISSIONER, COMMERCIAL FISHERIES ENTRY COMMISSION (via teleconference), introduced himself. 11:58:13 AM Representative Wilson asked why the cap would be removed without inserting the current regulation to know exactly the payment, and not be arbitrarily changed. Mr. Brown replied that currently, the statute provided that the fees for permits would be set to reflect the reasonable rate of return in the fishery. He remarked that the regulation interpreted that statute as four-tenths of 1 percent of the average value of the permit for the three years prior to the year in which fees were set; or the average of growth earnings in a fishery with no permit values. Representative Wilson asked if the concerns of the fishermen could be met through a regulation change. Mr. Brown replied in the affirmative. Representative Munoz queried the impact on the skipper with the removal of the cap. Mr. Brown conveyed that the permit cost was associated with every skipper. 12:02:27 PM BRUCE TWOMLEY, CHAIRMAN, COMMERCIAL FISHERIES ENTRY COMMISSION, explained that the fees applied to all the permits. He stated that the permit holders who would be affected by removing the cap did not hold a limited entry permit in Alaska. He stated that the fees would be set at four-tenths of 1 percent of the average catch of a permit in a particular fishery. He stressed that the figures were applied to the fee structure, which had 40 categories of fees. Representative Wilson felt that it was not about generating more capital, and felt that the smaller fishermen were paying more based on their catch because of the cap. She felt that it was an issue of fairness, rather than increased revenue. Mr. Twomley explained that fishermen operating below the cap were subject to the formula. He noted that there were a number of fishermen operating within the cap who would pay higher fees in the event that the cap was removed. 12:05:03 PM Representative Wilson wondered how many boats above the 3000 cap were Alaskan boats versus out of state boats. Mr. Twomley referred to an analysis that provided figures related to the question. He furthered that there was also a spreadsheet (copy on file), which identified all of the vessels identifying the effected permit holders. Representative Munoz asked how many of the vessels used Alaska stickers, who may be home ported in Alaska. Mr. Twomley looked to the analysis. Representative Munoz wondered how to read the percentage. Mr. Twomley thought he had information readily available. Representative Wilson wondered how the $3000 limit was impacted by the percentages. Mr. Twomley replied that it applied to the captains operating on various vessels. He stressed that it was the overall percentage distributed between Alaska and non- Alaska captains. He did not believe that there was a distribution by specific vessel available. Representative Pruitt noted that 88 percent of the foregone revenue was non-resident Mr. Twomley responded that the non-resident captains in the class represented 88 percent of the total captains. He stated that resident captains represented 11.8 percent. 12:09:33 PM Representative Wilson queried a way to see who was benefitting the most from the resources, who may not be paying back to the royalty. She wanted to know where the fish was processed. Mr. Twomley responded that the focus was on the captains. He also noted that the particular affected fisheries were also identified. He noted that the specific identified vessels had permits; and showed particular fisheries. He remarked that the value of the fisheries was reflected in Table 2. Representative Wilson queried the foregone revenue. Mr. Twomley replied that the figure was $2.2 million. Representative Wilson surmised that the $2.2 million was from non-Alaskans. Mr. Twomley replied that the larger percentage was from non-Alaska based vessels and non-Alaskan captains. Representative Gara requested a separate rate for factory trawlers. Co-Chair Thompson stated that the committee would try to get an answer from the dept. Representative Munoz felt that the fee cap issue related to the permits to the factory. Mr. Twomley noted that the overall effective date was immediately effective. He stressed that changing a fee for a fishery was difficult, and requested that the effective date be moved to January 1. He remarked that the language was adopted following the Carlson Case, and felt that it was useful direction for the commission. He did not understand why that language was deleted. Vice-Chair Saddler wondered if the effective date should be January 1, 2016. Mr. Twomley replied in the negative. He stated that he wanted the effective date to be January 1, 2017. Vice-Chair Saddler queried the reason for the request to change the effective date. Mr. Twomley replied that the permits were sold on a calendar year basis. CSHB 251 (FIN) was HEARD and HELD in committee for further consideration. Co-Chair Thompson thanked the presenters. He reviewed the agenda for the following day. Co-Chair Thompson recessed the meeting to a call of the chair [Note: the meeting never reconvened]. ADJOURNMENT 12:15:14 PM The meeting was adjourned at 12:15 p.m.