Legislature(2001 - 2002)
03/26/2001 05:58 PM House FSH
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
March 26, 2001
5:58 p.m.
MEMBERS PRESENT
Representative Gary Stevens, Co-Chair
Representative Peggy Wilson, Co-Chair
Representative Drew Scalzi
Representative Fred Dyson
Representative John Coghill
Representative Beth Kerttula
MEMBERS ABSENT
Representative Mary Kapsner
COMMITTEE CALENDAR
HOUSE BILL NO. 194
"An Act relating to fees for commercial fishing licenses and
permits; and providing for an effective date."
- MOVED HB 194 OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 194
SHORT TITLE:ENTRY PERMIT FEES
SPONSOR(S): REPRESENTATIVE(S)STEVENS
Jrn-Date Jrn-Page Action
03/19/01 0648 (H) READ THE FIRST TIME -
REFERRALS
03/19/01 0648 (H) FSH, RES, FIN
03/26/01 (H) FSH AT 5:00 PM CAPITOL 124
WITNESS REGISTER
MARY McDOWELL, Commissioner
Commercial Fisheries Entry Commission
Alaska Department of Fish & Game
8800 Glacier Highway, Suite 109
Juneau, Alaska 99801-8079
POSITION STATEMENT: Testified in support of HB 194 and answered
questions.
STEPHEN WHITE, Assistant Attorney General
Natural Resources Section
Civil Division (Juneau)
Department of Law
PO Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: Testified in support of HB 194 and answered
questions.
JERRY McCUNE
United Fishermen of Alaska
211 4th Street
Juneau, Alaska 99801
POSITION STATEMENT: Testified in support of HB 194.
SUE ASPELUND, Executive Director
Cordova District Fishermen United
PO Box 939
Cordova, Alaska 99574
POSITION STATEMENT: Testified in support of HB 194, but
requested the legislature re-examine the "cap" issue of the
bill, after it is passed.
ACTION NARRATIVE
TAPE 01-14, SIDE A
Number 0001
CO-CHAIR PEGGY WILSON reconvened the House Special Committee on
Fisheries meeting at 5:58 p.m. [The minutes for the Presentation
on LIDAR Technology by Tim Veenstra, Airborne Technologies,
Inc., are found in the 5:06 p.m. cover sheet for the same date.]
HB 194-ENTRY PERMIT FEES
CO-CHAIR WILSON announced that committee would hear HOUSE BILL
NO. 194, "An Act relating to fees for commercial fishing
licenses and permits; and providing for an effective date."
Number 0064
CO-CHAIR STEVENS, sponsor of the bill, pointed out Mary
McDOWELL, Commercial Fisheries Entry Commission; Steve White,
Department of Law; and Jerry McCune, United Fishermen of Alaska,
as people who have been critical in developing this bill and who
will be speaking to the committee.
CO-CHAIR STEVENS explained that HB 194 deals with the Carlson
case, which was brought against the Commercial Fisheries Entry
Commission [CFEC] because [CFEC] had been charging nonresidents
three times more than resident fishermen. The courts have said
this is against the law. A differential can only be used if
it's based on the amount residents pay in taxes as compared to
what nonresidents pay in taxes. Therefore, HB 194 repeals
current statute that requires CFEC to charge nonresident fishers
three times the amount charged a resident fisher and replaces it
with a provision that gives CFEC the authority to charge
nonresident fishers the maximum amount allowed by the court.
CO-CHAIR STEVENS commented that Steve White, the state's
attorney, has been arguing this case in the superior court,
claiming that there are six budget categories that "we" should
be able to use to charge outside residents more than in-state
residents. In June 2000, the superior court came up with a
formula of what "we" could charge [nonresidents], but the court
only allowed two of the six budget categories. He noted that
[the state] might owe [nonresident] fisherman $22.5 million due
to what they have been charged over the years. He said that Mr.
White will be appealing this in the state supreme court as well
as attempting to get the other four categories included in the
formula. Right now, a [nonresident] fisherman will be charged
three times more than an [resident] fisherman, despite being
told by the court that [CFEC] can no longer do that. So, this
bill would enable the CFEC to stop using the three-to-one
[ratio] and begin to use the maximum amount allowed by the
courts. The Department of Law is trying to include the four
other [budget] categories into this formula.
CO-CHAIR STEVENS remarked that HB 194 shows the court that "we
are acting in good faith." It doesn't make sense to continue to
use the three-to-one ratio that is in the statutes. He said the
formula will "enable us to solve the question the court has
ruled [on] and still leave us some flexibility to charge as much
as we can to nonresidents."
Number 0516
MARY McDOWELL, Commissioner, Commercial Fisheries Entry
Commission, Alaska Department of Fish & Game, stated that CFEC
is very supportive of this legislative effort to address the fee
issues raised by the Carlson lawsuit. She referred to Co-Chair
Stevens's remarks and said this bill does not resolve the
Carlson case, because it's not retroactive. The Carlson case
involves looking at what the [CFEC] has charged [nonresidents]
over the last 18 years and developing a formula for what is
"allowable in each of those 18 years." At some point the court
will rule on what [CFEC] owes in a refund, if anything. She
reiterated that the current dilemma is that CFEC is still
charging "three to one," so additional "potential debt" is still
accruing.
MS. McDOWELL commented that if the superior court ruling is not
overturned, there will be an additional debt of $1.13 million
each year in overcharges plus interest. This would eventually
be paid, if [CFEC] doesn't get the decisions overturned. She
said about 250 members are added to the "Carlson class" every
year, under the fees for the current statute. The effort here
is to "stem the hemorrhaging." This bill would stop the accrual
of additional debt, if the superior court ruling stands. But if
the plaintiff prevails, the debt will increase. This is
"splitting the difference," assuming that [CFEC] would put fees
in place right now that would comply with the superior court
ruling. If the superior court ruling stands, this bill would
allow [CFEC] to establish fees that would, "all things being
equal," keep [CFEC] from accruing additional debt.
Number 0740
REPRESENTATIVE KERTTULA asked if the bill passed, and did not
contain everything that the plaintiff wanted, whether "we might
have a better chance of negotiating than to stop the case."
Number 0766
STEPHEN WHITE, Assistant Attorney General, Natural Resources
Section, Civil Division (Juneau), Department of Law, stated that
he did not think settlement was a viable option in this case
since the plaintiffs want much more than $22.5 million. The
plaintiffs' goal is to make "everything we've ever taken, [and]
collected in additional fees," unconstitutional. He does not
believe there is any "middle ground" between the state and the
plaintiffs. If this bill is passed this session, he will be
able to go before the supreme court and say that as soon as [the
state] found out it had liability, it took the appropriate steps
to change its practices to comply with the court. This [bill]
is going to be beneficial in showing "good-faith effort."
MR. WHITE said there will be arguments saying the state should
be penalized, that it should be paying not only "all these
people, but all the people who dropped out of the class, that we
should be paying all the refunds owed to them to some other
purpose." Mr. White said there is a real strategic advantage to
having this bill before the legislature and adopted before going
to the supreme court.
Number 0875
CO-CHAIR STEVENS asked Ms. McDowell how there could be a
potential of the state owing more than $22.5 million.
MS. McDOWELL reiterated that the superior court's decision was
to allow two out of the six [budget] categories that [CFEC]
asked for. However, the other side is saying, "we shouldn't of
even gotten those two [categories]."; they believe that there
should be no differential allowed at all.
MR. WHITE remarked that [the state] has appealed on eight
different legal points, and the other side has cross-appealed on
several [of those] legal points. If their cross-appeals were
successful, they "would take all that we gained from the
superior court and nullify it such that [what the state owes]
would be much higher than $22.5 million."
Number 0945
REPRESENTATIVE WILSON wondered what would happen to the three-
to-one ratio if this bill were put into effect.
MS. McDOWELL explained that the [superior] court has not said
that the three-to-one ratio is unconstitutional, but that the
"spread" between what is charged a resident and a nonresident is
a problem. For example, for years, nonresidents have been
charged the three-to-one ratio for crewmember licenses. The
charge has been $30 [resident fee] to $90 [nonresident fee].
Last year it was changed to $60 [resident fee] and $125
[nonresident fee]. But, under the current ruling, [the state]
will not owe a refund on this because the "spread" is a small
enough dollar amount within the allowable differential. The
[allowed] differential for the last two years has been
approximately $100. It varies from year to year.
MS. McDOWELL stated that under the provisions of HB 194, an
established resident fee would serve as a base. She said that
CFEC has five fee classes based on the earning potential in the
various fisheries. Under this bill, the "top fee" that could be
charged to a resident would be $300, which is $50 more than is
allowed now. Therefore, CFEC would probably increase all five
fee classes by 20 percent, which would then serve as base fees.
MS. McDOWELL went on to say that under the bill, for every
nonresident permit, CFEC would add the "allowable maximum" that
the court formula would allow for that year. In short, [CFEC]
would obtain all of the resident base fees plus the
differential. She noted that under this bill, nonresidents who
are in lower fee classes would end up paying more than they do
now because of the "extra differential" put on.
Number 1118
MS. McDOWELL stated that this bill also clarifies how crewmember
licenses that are part of the Carlson case are dealt with in
statute. The current $60 resident fee for crewmember licenses
remains in the bill. But the bill also authorizes the Alaska
Department of Fish & Game, which deals with crewmember licenses,
to add on the nonresident differential, if it chooses to do so.
MS. McDOWELL noted that this bill also deals with the $5 child
crewmember license that was established by the legislature last
year for both residents and nonresidents. This bill would allow
the Alaska Department of Fish & Game to add a nonresident
differential to this $5 fee.
MS. McDOWELL referred to the CFEC permit renewal, which includes
annual renewal of limit entry and interim-use permits, which are
permits needed to operate a vessel in a non-limited fishery or a
limited fishery that is still being adjudicated. The cost of
these permits would be the base fee plus a differential for
nonresidents.
Number 1219
MS. McDOWELL explained that the bill also deals with poverty
fees. For decades, [Alaska] Statute has had a provision that
provides a $15 resident license and a $45 nonresident license to
those renewing their permits, who are below poverty level. She
said one difficulty with this provision is that for every
poverty permit issued, the CFEC has to donate an insurance
premium to the fishermen's fund. This premium is slightly
higher than what is actually collected on the poverty fees. So,
there is a net loss with every poverty permit. This bill
proposes that in lieu of the $15 and $45 poverty fees, permits
for those below the poverty level would be half of what the
person would normally pay for a regular license.
MS. McDOWELL commented that at the lower fee classes, the price
doesn't change dramatically for poverty permits. Most of the
permits renewed at the poverty fee level are in the lowest fee
class, primarily in the rural small-boat fisheries. She said
700 out of 894 poverty permits issued in 2000 were in the $50
resident fee class. Under this bill, those permits would
increase to $30 from $15. In the higher fee classes,
nonresidents would pay considerably more [under this bill]. She
mentioned that there were only 32 nonresident high-fee permits
in 2000. Regulations were tightened about two years ago in
order to "weed out abuse" from nonresidents applying for poverty
fees. In short, she said there would be some increase of fees
for poverty fees in this bill but minimal for the lower fee
class.
CO-CHAIR WILSON remarked, "So altogether we'd be bringing in
more than we are now."
MS. McDOWELL replied that more funds would come from poverty fee
permits. But she indicated that it was difficult to comprehend
the total fiscal impact of the bill; it was a difficult fiscal
note to write because there's no place on a fiscal note to show
savings of liability. The fiscal note shows a potential loss of
around $470,000 in incoming revenue for FY 02 due to the fees
given from the superior court ruling. However, the state can
recoup that loss by the way refunds to nonresidents are
calculated.
Number 1416
MR. WHITE commented that it is a loss in revenue, but it's
"really revenue that we would have to pay back." An agreement
has also been made with the class [who are suing in the Carlson
case]: for an individual who might have paid more than the
permissible differential for some years and less than the
differential in others, the underpayments will be able to be
offset against the overpayments, and the difference will be
paid. He gave the following example: in 2002, the fees will be
based upon decisions of the superior court. He said if this was
appealed and the supreme court agreed to set a higher amount
that [CFEC] could charge for 2002, "we" don't lose the amount
that "we" were unable to charge [nonresidents]. This would be
due to the offset against what would have been owed those people
from earlier years. In short, there is "no net loss to the
state in that regard, it's just a loss of direct revenue to see
if ...."
Number 1520
REPRESENTATIVE KERTTULA asked if the three-to-one ratio is being
charged now and if the funds are being segregated.
MR. WHITE said no.
MS. McDOWELL said, "Charge it and it goes into the general fund,
[where] it's accounted for as fee-supported services."
REPRESENTATIVE KERTTULA said, "If we win, then it's just the
offset."
Number 1552
REPRESENTATIVE SCALZI commented that in regard to the "legal
aspects" of this bill, the argument that has been heard from the
"other side" is that going forward with this bill, is admitting
guilt, which would weaken the case. He asked Mr. White to
address this issue.
MR. WHITE remarked that the formula being adopted in this bill
is no longer a legal issue, regardless of what the supreme court
does. By adopting the formula, he said:
We're just dealing with the reality; we're not
conceding anything. We're not challenging the
formula. The only thing we're challenging is what
dollars we can put in the formula. ... We're not
giving up anything that's in dispute by doing what the
court has said that we need to do at this point.
REPRESENTATIVE SCALZI commented that this case is not unique.
Throughout the United States, similar resident/nonresident
issues have been brought up. He mentioned that "other people"
are watching this particular case.
MR. WHITE concurred with these comments. He said no other
states have challenged commercial fishing fees in this way, even
though other states charge much more [for nonresidents.] He
suggested that those fisheries "aren't valuable enough for
people to sue about." However, Mr. White said he is sure this
case is being watched in other states with much concern.
Number 1660
REPRESENTATIVE COGHILL remarked that it seems the differential
is being borne by struggling fisheries, which is significant.
He wondered if it was wise to let the court set the [permit]
fees, and how long it would take the court to do so.
MR. WHITE answered that the court is interpreting a federal
constitutional provision based upon a 1948 case that explains
how nonresidents can be charged more in certain circumstances.
He said [Alaska's] supreme court is the first court that has
actually "fleshed that out" and has said, "You can charge based
on taxes that the residents pay and the nonresidents don't pay
...." He believes the courts have been fundamentally following
U.S. Supreme Court precedent, he said, and the only issues that
remain are the budgetary issues, which will be determined in
court.
REPRESENTATIVE COGHILL remarked that this puts the court in the
"driver's seat." He wondered if this is where "we want to lead
it."
Number 1782
MR. WHITE replied that at the end of this lawsuit, the court
will decide upon a formula to figure out what amount to charge
nonresidents. This formula will vary from year to year,
depending on the following variables; population, percentage of
oil revenues that go into the general budget, and the state's
expenditures for commercial fisheries. These are outside the
court's control, and are actually factors that Alaskans control.
So, to some extent, the amount that nonresidents will be charged
will be determined by [Alaskan residents], not by the courts.
Number 1975
MR. WHITE said he was not aware of any other situations in which
nonresidents are being charged significantly more for commercial
opportunities.
REPRESENTATIVE DYSON remarked that residents [of Alaska] seem to
get a "real advantage" for loans when buying boats and permits.
He wondered if the courts are likely to say that "we" can't
discriminate in favor of Alaska residents for loans.
MR. WHITE indicated that this would not happen, because when the
state acts as a lender, it almost becomes a private financial
institution. The state can set its own criteria and favor its
own residents because the state is mainly distributing money
that belongs to the residents, from oil revenues. This [HB 194]
is different because people are being charged for the "ability
to pursue a livelihood." The courts have said "we" have a lot
more latitude to favor our residents over nonresidents, because
"it's commercial." The U.S. constitution says [the sate] has to
treat everyone (residents and nonresidents) equally except for
services that are paid for only by residents, such as by our oil
revenue.
Number 1999
MS. McDOWELL noted that while there is an "upside" (recoup and
save potential additional liability) to the decline in revenues
showed in the fiscal note, there is also a "downside." The
downside is that those revenues generated by [CFEC's] fees are
fee receipts that come into the CFEC. Right now, the Division
of Commercial Fisheries funds CFEC's budget and receives any
excess of the commission's funds. This is important, especially
to fishermen who are very supportive of this. Even though the
state will recoup this money, it is a cut to the budget. There
is concern about this, and hopefully "we will prevail at the
supreme court." At that point, if the fee differential can grow
under the supreme court decision, "our revenues will kick back
up, and that money will again be available to [Alaska Department
of] Fish & Game." She suggested that once a final supreme court
decision is made, this issue be revisited to see what the fees
would be. Right now, fishermen have agreed to support this hike
in fees from $250 to $300, which is "a painful thing for them
to support even that much." The fishermen support it because
they recognize the need for CFEC to keep revenues up. She said
with the base fees "set at $300 as a cap, we don't recoup, under
[the] superior court decision, all that we lose that we receive
for those programs."
Number 2104
REPRESENTATIVE WILSON wondered if there was any possibility that
the state will win this case when it is appealed.
MR. WHITE indicated that he was fairly confident that the state
will win several points on the appeal, which should
significantly reduce, if not eliminate, the debt. He reiterated
that he will be appealing four budget issues, and the issue of
whether pre-judgment interest should be paid, for the time that
[nonresidents] overpaid. Even though the superior courts ruled
this, he said he would argue that [the state] doesn't have to
pay that because the law does not provide for prejudgment
interest. He indicated that if this point were appealed, the
bill would be "cut by half" if he added additional budget
categories. But, at this point, there is no precedent. There
will be many arguments regarding non-legal issues such as "good
faith," since this is such a unique case. He said it is
difficult to predict the outcome of this case, because this is
at the "leading edge" of this kind of litigation.
Number 2194
CO-CHAIR STEVENS remarked that several assistant attorneys
general have handled this case. He wondered if Mr. White could
promise he would stay with the case.
MR. WHITE stated that he expects to get a definitive ruling by
next summer, when hopefully [the state's] liabilities will
become very clear. He said, "It's just a matter of if we still
have liabilities of putting the formula through the last 20
years and getting the cut check." But in any event, he will be
here to "carry it through to the end," he concluded.
JERRY McCUNE, United Fishermen of Alaska (UFA), stated that UFA
has agreed to the "$300 hike or a 20 percent increase" on
resident fees, in order to be able to charge "a little bit more"
on the others' side. However, this is only UFA's opinion. He
mentioned that the committee will probably hear from individuals
about this bill; even though [UFA] attempted to contact non-UFA
groups via e-mail and other means about this issue, he said he
"couldn't get to everyone in the world." He said UFA supports
this legislation and thanks the sponsors. [This bill] is a good
approach to solving this dilemma right now. It will help get
out of this 10.5 percent interest rate and hopefully prevail on
the other four issues currently in the court. Then the fees can
be finalized according to the court.
Number 2306
SUE ASPELUND, Executive Director, Cordova District Fishermen
United (CDFU) testified via teleconference:
Thanks for this opportunity to testify. I would like
to reiterate CDFU's support for this legislation. Our
biggest concern with the whole situation is the lost
revenue to the Division of Commercial Fisheries, ...
because of the timing and the fact that we're not able
to get out and really get the pulse of the fleet on
the maximum amount due.
We also voted to support the $300 increase. However,
as Mary McDowell discussed, once this is through the
court system and finalized, we would certainly hope
that the legislature would perhaps re-examine the cap
issue, so that if we find out that the catch [of]
commercial fisheries [is] going to be as substantial
as we fear, ... we have the opportunity to get to the
(indisc.) and perhaps support a higher cap so that we
minimize the damage (indisc.) Thank you.
Number 2404
REPRESENTATIVE SCALZI made a motion to move HB 194 out of
committee with individual recommendations and attached fiscal
notes. There being no objection, HB 194 moved from the House
Special Committee on Fisheries.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at 6:34
p.m.
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