Legislature(1997 - 1998)
03/10/1997 03:21 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE March 10, 1997 3:21 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative John Cowdery, Vice Chairman Representative Bill Hudson Representative Jerry Sanders Representative Joe Ryan Representative Tom Brice Representative Gene Kubina MEMBERS ABSENT All members present COMMITTEE CALENDAR * HOUSE BILL NO. 167 "An Act repealing certain requirements relating to posting and reporting of prices paid for salmon." - MOVED HB 167 OUT OF COMMITTEE HOUSE BILL NO. 73 "An Act extending the termination dates of the salmon marketing programs of the Alaska Seafood Marketing Institute and the salmon marketing assessment; and providing for an effective date." - MOVED HB 73 OUT OF COMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HB 167 SHORT TITLE: DISCLOSURE OF SALMON PRICES SPONSOR(S): REPRESENTATIVE(S) IVAN JRN-DATE JRN-PG ACTION 03/05/97 542 (H) READ THE FIRST TIME - REFERRAL(S) 03/05/97 543 (H) LABOR & COMMERCE 03/10/97 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 73 SHORT TITLE: SALMON MARKETING ASSESSMENT & ASMI SPONSOR(S): REPRESENTATIVE(S) HUDSON, Grussendorf, Elton JRN-DATE JRN-PG ACTION 01/15/97 72 (H) READ THE FIRST TIME - REFERRAL(S) 01/15/97 72 (H) FSH, FINANCE 01/16/97 92 (H) L&C REFERRAL ADDED 01/21/97 113 (H) COSPONSOR(S): ELTON 02/10/97 (H) FSH AT 5:00 PM CAPITOL 124 02/10/97 (H) MINUTE(FSH) 02/17/97 (H) FSH AT 5:00 PM CAPITOL 124 02/17/97 (H) MINUTE(FSH) 02/19/97 (H) FSH AT 5:00 PM CAPITOL 124 02/19/97 (H) MINUTE(FSH) 02/19/97 (H) MINUTE(FSH) 02/21/97 422 (H) FSH RPT 3DP 1NR 02/21/97 423 (H) DP: AUSTERMAN, KUBINA, HODGINS 02/21/97 423 (H) NR: IVAN 02/21/97 423 (H) 2 FISCAL NOTES (REV, DCED) 03/10/97 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER REPRESENTATIVE IVAN IVAN Alaska State Legislature Capitol Building, Room 418 Juneau, Alaska 99801 Telephone: (907) 465-3882 POSITION STATEMENT: Sponsor of HB 167. BRUCE SCHACTLER Kodiak Seiners Association Box 2254 Kodiak, Alaska 99615 Telephone: (907) 486-4686 POSITION STATEMENT: Testified in support of HB 167 and HB 73. JERRY MCCUNE United Fishermen of Alaska 211 Fourth Street, Suite 112 Juneau, Alaska 99801 Telephone: (907) 586-2820 POSITION STATEMENT: Testified in support of HB 167. DEAN PADDOCK, Executive Director Bristol Bay Driftnetters Association P.O. Box 21951 Juneau, Alaska 99802 Telephone: (907) 463-4970 POSITION STATEMENT: Testified in support of HB 167 and HB 73. RICK LAUBER, Lobbyist Pacific Seafood Processors Association 321 Highland Drive Juneau, Alaska 99801 Telephone: (907) 586-6366 POSITION STATEMENT: Testified in support of HB 167. KAY ANDREWS, Gillnetter Deck Hand P.O. Box 7211 Ketchikan, Alaska 99901 Telephone: (907) 225-2463 POSITION STATEMENT: Testified in support of HB 167 and HB 73. TOM WRIGHT, Legislative Assistant to Representative Ivan Ivan Capitol Building Room 418 Juneau, Alaska 99801 Telephone: (907) 465-3882 POSITION STATEMENT: Answered questions on HB 167. RODGER PAINTER, Member Board of Directors Alaska Seafood Marketing Institute P.O. Box 20704 Juneau, Alaska 99802 Telephone: (907) 463-3600 POSITION STATEMENT: Testified in support of HB 73. ART SCHEUNEMANN, Executive Director Alaska Seafood Marketing Institute 1111 West Eighth, Room 100 Juneau, Alaska 99801 Telephone: (907) 465-5560 POSITION STATEMENT: Testified in support of HB 73. NARRATIVE TAPE 97-19, SIDE A Number 001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee to order at 3:21 p.m. Members present at the call to order were Representatives Rokeberg, Brice, Sanders, Hudson and Cowdery. Representative Kubina arrived at 3:30 p.m. and Representative Ryan arrived at 3:50 p.m. HB 167 - DISCLOSURE OF SALMON PRICES Number 048 CHAIRMAN ROKEBERG announced the first order of business would be HB 167, "An Act repealing certain requirements relating to posting and reporting of prices paid for salmon." Number 094 REPRESENTATIVE IVAN IVAN, sponsor of HB 167, read his sponsor statement into the record: "House Bill 167 repeals two provisions of Alaska statute that mandate fish tickets for salmon reflect the current salmon price and that a processor will post the current salmon price at each location where salmon is purchased. "With salmon prices changing throughout a fishing season, the posted price on a salmon ticket does not necessarily reflect the final price. This leaves the possibility that a dishonest buyer could claim a preliminary price as a `final' price because once the fish ticket is signed by the fisherman, it conceivably becomes a binding contract. "Processors usually do not know the final price before or during the season. The current law is unenforceable and impractical. For example, some processors, before the start of the fishing season, are posting a 5 cent per pound price since they do not know what the wholesale price will be. Posting prices before the start of the season puts both the harvesters and the processors in a non- competitive situation." REPRESENTATIVE IVAN explained that in reviewing the legislation that was previously passed, the intent was to give both the processors and the fishermen an opportunity to come forth with a price that the fishermen count on throughout the season, with the intent of trying to get the best possible price for the fish. Number 259 BRUCE SCHACTLER, Kodiak Seiners Association, testified via teleconference from Kodiak. He said he is happy to see HB 167 introduced. Mr. Schactler said he thought the law was a mistake when it was passed, even though the intentions were good. Since then, it has actually exaggerated the problem that it was intended to be a cure. He said the fish prices have stayed artificially low because of the law. One of the big problems is with the wholesalers. For example, the Japanese will look at the price on paper, which is artificially low, to make sure they don't get burned. The processors don't want to have too high of a price to begin with because they don't know what the price will actually be. The wholesalers look at the artificially low price and compute their wholesale offer using that as a base price. The law has helped the wholesalers to the fishermen's disadvantage. The price should be proprietary. Mr. Schactler said he supports HB 167. CHAIRMAN ROKEBERG asked Mr. Schactler to forward the association's written position to the committee. He then asked Mr. Schactler to give his testimony on HB 73. HB 73 - SALMON MARKETING ASSESSMENT & ASMI CHAIRMAN ROKEBERG noted due to time constraints, Mr. Schactler would also give testimony on HB 73, "An Act extending the termination dates of the salmon marketing programs of the Alaska Seafood Marketing Institute and the salmon marketing assessment; and providing for an effective date." BRUCE SCHACTLER, Kodiak Seiners Association, testified via teleconference from Kodiak. He said the Alaska Seafood Marketing Institute (ASMI) is very important. If you don't have marketing, you don't have anything. The world market, as it currently is, makes ASMI all that much more important. Mr. Schactler said his association supports the extension of the 1 percent marketing tax and urged the committee members to move HB 73 forward. CHAIRMAN ROKEBERG asked Mr. Schactler to forward the association's written position to the committee. He indicated the committee would go back to HB 167. HB 167 - DISCLOSURE OF SALMON PRICES Number 678 CHAIRMAN ROKEBERG announced the committee would continue to take testimony on HB 167, "An Act repealing certain requirements relating to posting and reporting of prices paid for salmon." JERRY MCCUNE, United Fishermen of Alaska, came before the committee to testify on HB 167. He said when the law was passed, people behind the bill thought they were going to force the processors into a corner to give a real price. A lot of the time the processors in different areas don't know the price as the wholesalers aren't giving them a price. They were pushed into a corner to give a low price. Mr. McCune said the whole thing kind of backfired, but at the time people thought it would be helpful. He noted it is unenforceable unless someone went to every plant and forced them to put the price out. It isn't realistic. Mr. McCune said 99 percent of the fishermen he has talked to in Alaska would like to see the law repealed. CHAIRMAN ROKEBERG asked Mr. McCune to give a background as to why the law was passed in the first place. MR. MCCUNE explained it was centered around the Bristol Bay area as the fishermen were having problems with prices. They thought that by cornering the processors, they would put out a real price. The backfire was the processors don't always know the final price until the product is sold, but they know what the base price roughly should be. Number 861 DEAN PADDOCK, Executive Director, Bristol Bay Driftnetters Association, came before the committee to give his testimony. He said the record shows that he testified in favor of the bill when Senator Jacko proposed it a few years ago, but as Mr. McCune testified, it's the attitude of the bulk of the catchers that the law depresses the final price rather than forcing it upwards. Mr. Paddock said they would like the law to be repealed. Number 968 CHAIRMAN ROKEBERG asked Mr. Paddock if the association originally supported the legislation and didn't have anything more to do with it. MR. PADDOCK responded they only supported the legislation. It was not introduced at their request and they had no part in the design of the bill. Number 996 CHAIRMAN ROKEBERG referred to Mr. McCune's comment regarding 99 percent of the fishermen he knows supports HB 167 and asked who might want to keep it on the books. MR. PADDOCK said he suspects that on any issue there is always a minority opinion. He said he is fully in support of their ability to disagree with the majority. Mr. Paddock referred to the way the prices are ultimately determined in the Bristol Bay fishery and said Bristol Bay is the largest red salmon fishery in the state and anywhere else. He informed the committee that virtually all their red salmon that isn't canned goes to Japan. It is in the interest of the Japanese to try to keep that price down. They have not in recent years, ever since there has been the competition from pen- reared fish from other countries, been willing to state an up front price. There hasn't been competition between Japanese companies to get their hands on Bristol Bay fish. On the other hand, they've shown a great interest in purchasing fish elsewhere to try to suppress their need to fill their requirements for red fleshed salmon to keep that Bristol Bay price down. Mr. Paddock said they don't know how big the supply is going to be until those fish have all been caught and by that time the season is over. He said last year some of the Bristol Bay companies posted a price. Some posted 50 cents, some posted 60 cents. At the end of the season, they were given a 15 cent retroactive payment that brought the price up to 75 cents, which is virtually the standard for practically all of the companies in the bay. He said that is the way it works. Number 1199 RICK LAUBER, Lobbyist, Pacific Seafood Processors Association, came forward to give his testimony. He informed the committee that when the law was enacted, he could see no way that it would help and he could possibly see that it would harm. Mr. McCune indicated that he thought that the fact of posting of a low price might have an impact on the buyer, the wholesalers in this case. By starting out with a low price, it may give a false signal to the wholesalers that the price is going to be low and their expectations are for a lower price. Mr. Lauber stated he can't say that it has had a major impact. He said when the legislation was passed, it called for an independent group to be contracted by the state of Alaska to apprise fishermen, processors, etc., of what the current market situation is worldwide, particularly in Japan. The University of Alaska has contracted to do that and their price information has helped fishermen and processors in their price negotiations. Mr. Lauber noted that HB 167 doesn't repeal that portion of the law. He commended the sponsor for introducing the bill and urged passage. MR. LAUBER said we need good strong prices. Fishermen can no longer continue to fish for lower prices, particularly in the area of pink and chum salmon. He has heard some processors say that the market is so bad for some of the product that if the fishermen gave them the fish, they couldn't sell it at a profit. CHAIRMAN ROKEBERG questioned Mr. Lauber as to how many processors he represents in his association. Number 1423 MR. LAUBER said there are approximately 30 processors and they process about 50 percent of the product caught in Alaska. He said his association is a trade association that has been operating in Alaska for 83 years. Number 1520 CHAIRMAN ROKEBERG asked Mr. McCune how many fishermen he represents. MR. MCCUNE responded he represents 21 individual groups and about 8,000 fishermen. Number 1607 KAY ANDREWS, Gillnetter Deck Hand, testified via teleconference from Ketchikan. She said she has concern regarding the fish tickets. She explained they add up the amounts on the fish tickets for tax purposes. Ms. Andrews said she doesn't receive W-2 forms or a end-of-the year statement from the particular processors they sell to. She said if there isn't a price on those tickets, how is she supposed to keep track of what she is receiving for what fish. CHAIRMAN ROKEBERG asked Mr. Lauber to respond. Number 1670 MR. LAUBER said he isn't sure that's common practice. Most large companies he is familiar with give a final fish ticket price or a final statement. He said as stated in other testimony, the original fish ticket might have a price of 60 cents, but the eventual price kept going up. There are also cases where there are bonuses or post-season adjustments. CHAIRMAN ROKEBERG said he would assume that most of the processors issue a 1099 miscellaneous form of some type at the end of the year. MR. LAUBER said he would think so. He explained that Mr. McCune had indicated to him that in his personal business dealings he does receive a 1099 statement from his buyers. It deals with the posting of a price. The law had no affect on the fish tickets. Number 1786 TOM WRIGHT, Legislative Assistant to Representative Ivan Ivan, came before the committee. He noted he has a drift permit for Cook Inlet. Under 16.05.690(c), which is being repealed, it states that the fish ticket recording the purchase of salmon must include the current price paid, per pound, for reach species of salmon purchased. He said the price listed on the fish ticket doesn't necessarily mean that's going to be the final price that a person will receive for that species. He said what started out in Cook Inlet, for example, at 75 cents a pound ended up at $1.15 with most processors. Mr. Wright explained if the 75 cents a pound was the price they were going to stick with at the beginning of the season and not see any retroactivity, they would have lost 40 cents on the final price. He noted the final prices aren't posted until the end of the year. Mr. Wright pointed out the processor he delivers to issues a 1099 form at the end of the year. He noted he also can get a list, at any time, of what he has delivered to the cannery at a specific time. Number 1843 CHAIRMAN ROKEBERG asked Mr. Wright if the practice of issuing fish tickets won't be affected by the legislation. MR. WRIGHT said he doesn't see where it would be. Number 1867 CHAIRMAN ROKEBERG asked if there was any further witnesses. There being none, he closed the public hearing. Number 1871 REPRESENTATIVE JOHN COWDERY made a motion to move HB 167 out of committee with the fiscal note. CHAIRMAN ROKEBERG noted there is a zero fiscal note. He asked if there was an objection. Hearing none, HB 167 moved out of the House Labor and Commerce Committee. HB 73 - SALMON MARKETING ASSESSMENT & ASMI Number 1900 CHAIRMAN ROKEBERG announced the committee would take further testimony on HB 73, "An Act extending the termination dates of the salmon marketing programs of the Alaska Seafood Marketing Institute (ASMI) and the salmon marketing assessment; and providing for an effective date." REPRESENTATIVE BILL HUDSON, sponsor of HB 73, said he was the original sponsor of the current law. Representative Hudson said, "It was no easy task to get the fishermen and women of this state willing to pay a 1 percent assessment for marketing in those days, but in the years that have ensued, I think that this domestic marketing and these monies for this domestic effort has proven invaluable." Representative Hudson explained HB 73 would extend the current 1 percent domestic salmon marketing assessment when the law sunsets on June 30, 1998. It is a measure that has to be dealt with either now or before the end of next session. He explained ASMI works to create a brand identity for Alaska seafood. He noted he was the executive director of ASMI for three years and has seen how it can effectively help the industry recover from a botulism incident that literally tied up thousands of cases of canned salmon. He noted there are people from ASMI in attendance. He referred to the ASMI Board being large and said when the salmon marketing tax was created, they wanted to incorporate the harvesters into the decision making process. Historically, the processors were on one side and the harvesters were on the other side and they were trying to make one industry out of the whole industry. As a consequence of having 12 people from the harvesting side and 12 from the processing side, we have brought the fishermen and women into the marketing element. One element of the marketing program is to take fishermen into the marketplace. He indicated there is strong competition with the farmed markets. This marketing tax, in his opinion, has far exceeded expectations. We now have a broader industry perspective because when the harvesters/fishermen go back to their various gear groups, they can speak about full industry marketing. The 1 percent tax wouldn't have happened without their approval. He said the feedback he has received indicates that they believe this is a valuable tool and should be maintained. Representative Hudson said it is necessary that HB 73 is passed before the program sunsets. The 1 percent tax generates approximately $3.5 million and it would go into the 1997 projected revenue. It might be a little bit more for 1998. Number 2124 REPRESENTATIVE HUDSON said in addition, included in ASMI is the seafood marketing assessment. The assessment is voluntarily paid by processors. It is one of the few industries where both the processors and the harvesters have agreed to ante up their own taxes for something that they mutually feel is important. The only other source of funds that is available is from the federal government which is the overseas USDA marketing plan. That is about $3.1 million. There is about $550,000 to match the $3.1 million from the federal assessment. Representative Hudson noted the director of ASMI is in attendance. Number 2206 RODGER PAINTER, Member, Board of Directors, Alaska Seafood Marketing Institute, came before the committee to give testimony in support of HB 73. He explained the 1 percent tax is vital to their overall program. They are projecting revenues from the 1 percent tax, in fiscal year 98, of about $3.8 million. That would represent about 36 to 38 percent of their overall funding. The loss of that would be devastating to their programs. Mr. Painter stated a little over 60 percent of their domestic marketing program is supported with the 1 percent tax. The feedback from the fishing community has been supportive. He said he would hope that when the industry is having problems, the legislature would see fit to continue with what is a voluntary effort, on behalf of the industry, to provide for generic marketing programs. Number 2280 REPRESENTATIVE COWDERY questioned what portion the state is funding. MR. PAINTER explained the 1 percent assessment on fishermen funds about 38 percent of the program. The remainder of that funding comes from a voluntary .3 percent assessment on seafood processors. Another $3 million comes from the federal government through a market assistance program for international programs. The state is supporting about $550,000, which is dedicated solely to match that federal grant. The federal government is supplying about $3.1 million. He noted the federal government does require a certain match. Number 2341 REPRESENTATIVE JOE RYAN said a couple of years ago Senator Stevens gave a speech where he said people were looking at how to market Alaska salmon in the Far East where there is potentially a huge market. He thought that it had come about to where the fish would be quick-frozen in plastic sleeves and shipped on large ships to the Far East, but what the state needed to do was to investigate those markets and see what is going on. Representative Ryan said he has spoken with a number of people who hold commercial fishing licenses and they have not been very enthusiastic about what is happening to their industry, seeing it go away due to farmed salmon. He said farmed salmon can be harvested at any time. He asked what ASMI has done to investigate promoting Alaska salmon in Asia and Southeast Asia such as the Peoples Republic of China and the technology Senator Stevens spoke about. Number 2384 MR. PAINTER said ASMI has been aggressively working in the Far East. Last year, they participated in a trade show in China. They will participate in a trade show in Hong Kong in May. Mr. Painter said there is also another trade show scheduled in China in 1998. Number 2412 ART SCHEUNEMANN, Executive Director, Alaska Seafood Marketing Institute, came before the committee to give testimony in support of HB 73. He said the Asian markets are markets of the future. He said ASMI currently has active programs with the Foreign Agricultural Service in about nine countries. Mr. Scheunemann informed the committee that Hong Kong, Taiwan and China are on their list of countries. He noted they haven't been to China in the past because the dollars that ASMI receives, to a point, are somewhat dictated by the federal government in terms of the markets. He said ASMI makes application for the funds and the federal government says, "Yes, that's a good idea," or "no, that's not such a good idea." Mr. Scheunemann said they have just received funding, within the allocation of money, from the federal government. He said that he believes this is second year that they have asked for an allocation within the total to do things in China. They have done a trade show in Qingdao, and some people just came back from a trade mission to Shanghai and Taipei. Mr. Scheunemann said there is a lot of interest in the Asian Markets. TAPE 97-19, SIDE B Number 001 MR. SCHEUNEMANN informed the committee ASMI is aggressively pursuing all of the things that Senator Stevens has been talking about. He noted Senator Stevens has supported the Market Assistance Program of the Department of Agriculture. Number 077 CHAIRMAN ROKEBERG questioned why ASMI is spending money on television adds within the boundaries of the state of Alaska. MR. PAINTER said one of the things ASMI is concerned about is that the people of the state of Alaska understand the importance of the industry to the state, so ASMI dedicates a certain amount of money to that effort. Number 064 MR. SCHEUNEMANN, in response to Chairman Rokeberg's question, said the board of Directors feels very strongly about the issue of advertising, promoting and marketing outside of the state of Alaska. The balance on that is there is a need to let people know what ASMI is doing. He said over the last year, ASMI has spent maybe $10,000 on some advertising, mostly on local public broadcasting channels in Juneau and Anchorage. He noted they have also done some radio spots. Mr. Scheunemann said ASMI spends time and effort talking to fishermen/processors in Alaska. From a marketing perspective, the ASMI board agrees that their major effort needs to continually be directed outside Alaska to the marketplace. MR. SCHEUNEMANN explained that in the United States the salmon product has to compete against beef, pork and chicken. Salmon has 1.3 pounds, per capita, consumption. He noted that is all salmon including farmed salmon and wild natural Alaska salmon. Over the last year and a half, in the whole salmon category, there has been a 27 percent increase. Mr. Scheunemann informed the committee that Alaska has been recognized by the Natural Fisheries Institute and a number of other bodies around the country as having contributed to that. He said ASMI does a lot of television and radio advertising during good years and when there is more money. He said when they have leaner years, they go to the stores and do demonstrations. Fishermen have been in the stores to educate the industry and to promote to the consumer on a direct basis which is the most effective way to get new consumers. MR. SCHEUNEMANN said ASMI has gotten a lot more aggressive in the restaurant food service feeding category and institutional feeding. Those programs have shown growth in sale volumes. He said the only thing they can't guarantee is increased prices to the fishermen and processors. He said he can guarantee that ASMI is continually getting the message out about Alaska seafood and salmon. Number 297 REPRESENTATIVE RYAN discussed his trip to Disney Land in Orlando ten years ago. There was an area where there were venues from a number of different countries and they all seemed to have restaurants associated with them. He said it was his understanding that on the average, 50,000 people a day came through that park. He said this would be an ideal place for the state of Alaska to set up a restaurant with salmon and seafood. He noted there were also movie theaters where they showed portions of films of the different countries. He mentioned this to Tourism and Marketing and they told him that they were investigating something similar to this approach. Number 337 MR. SCHEUNEMANN said it has crossed their minds. It is not part of ASMI's charter and it would be difficult for them to fund or set up. However, they are contacted, on a fairly regular basis, by restaurant entrepreneurs who are doing certain types of themes. He noted there is an Alaskan Klondike Restaurant theme at Disney World. He said it is left up to the private sector to develop that kinds of opportunity. Mr. Scheunemann said ASMI does have a relationship with Disney in terms of putting together a program with their food service decision makers. They also have an executive chef decision-making training program where ASMI has a partnership with the Culinary Institute of America. He said, "We had at one of our events, our training events, four day Alaska seafood training, how to make money and menu Alaska salmon and seafood profitably to the people who are making those decisions to buy the product and showing them why they can make money on their menus." Number 433 REPRESENTATIVE RYAN referred to fishermen getting $1.20 or $1.30 a pound in Cook Inlet and asked why it costs him $18.00 a pound in a restaurant. MR. SCHEUNEMANN said that is one of things that is not in ASMI's control. He noted there is an economic model that people can look at for just about every food product in existence. As you go up the food chain, the value continues to get added past the production and processing side. Alaska salmon is considered a high value product in many places and people will pay for it. Number 489 REPRESENTATIVE HUDSON said when he was the executive director of ASMI, they were looking at 6 cents a pound to transport salmon. Salmon sitting in a warehouse or freezer depreciated at 1 percent per month as there is wastage and spoilage. Representative Hudson said, in his opinion, the program works very well because it does compete against beef, pork, chicken and other seafood products. He continued to discuss how menu development occurs. He also informed the committee of a situation where Julia Childs had been making great strides at trying to prove to everybody that frozen salmon wasn't any good. Representative Hudson said they challenged her and took a frozen white king salmon to New York City and had a cook off. Julia Childs had to personally recognize that fresh frozen, if done correctly, was not only every bit as good as farmed fish, but better. He said absent a good marketing program, Alaska would be losing out to beef, pork and chicken in a big way. Representative Hudson referred to the farmed salmon and said they are all heavily subsidized whether they are from Norway, Chili or Scotland. The state only puts $550,000 into the program. CHAIRMAN ROKEBERG asked how much the matching funds are. REPRESENTATIVE HUDSON responded that the match is $3.1 million of federal money. He noted the program is bringing in over $6 million of industry money from harvesters and processors. The law states that the harvesters could vote themselves totally out of this tax. Number 723 REPRESENTATIVE SANDERS asked Mr. Scheunemann how much he thinks Alaskan salmon demand went up last year. MR. SCHEUNEMANN said that is tough question because they can't measure what the Chileans volume movement is in a particular chain. He said, "I would guess that just given the volume of product that we moved through the domestic marketplace in the last year, and that's all salmon consumption - that's canned, fresh frozen and fresh as well, I would bet some good money that we probably have 15 percent of that or maybe more of that percentage change. I think the important thing to keep in mind is that that line had stayed pretty flat for about five year period of time prior to 1993, at about a pound. I think when the 1 percent was instigated and put in place, there was some idea that we were going to increase market share by two or three pounds. There was these huge percentages and that type of thing which in any analysis of gaining market share, you don't make those kinds of strides in any food product or any food category. So three-tenths is pretty significant. Now low prices, a lot of volume, but a lot push behind that low price, high volume." MR. SCHEUNEMANN informed the committee one thing that isn't in ASMI's control is the price to the fishermen or how it is set and determined. He said referred to Denny's Restaurants and said they have 1,800 restaurant chains around the United States. They have been serving six ounce portions of chum salmon fillets for $4.99 to $6.99. That one deal consisted of about 800,000 six ounce portions. Number 897 REPRESENTATIVE SANDERS said a couple of years ago the federal government came up with a program where they were going to use salmon in school meals. He asked if that was included in the increase of salmon being eaten. MR. SCHEUNEMANN said that would be separate category. The federal government has purchased canned salmon from the seafood industry in Alaska for a number of years. They buy it under school lunch emergency buying entitlement type programs. It is bought as a commodity and it is put out on the shelves. He said ASMI had something to do with pushing that through. The federal government is also interested in getting schools to purchase value-added products such as salmon nuggets. Mr. Scheunemann said they contributed to the Fisheries Development Foundation in Anchorage where they gave assistance in pushing that through. The current issue is that there are a lot of processors that make salmon nuggets and the USDA has purchased a fair amount of nuggets for their school lunch program. The question is, "How much more money does the federal government, through its entitlement programs, give to school districts to buy certain classes and categories of food products?" He noted a lot of that has to do with politics. Mr. Scheunemann said every one of our processors, in his view, are creating new products. He noted pouches of salmon could revolutionize the industry and could be custom tailored for the large contract feeders of the world that service cafeterias. He said there are microwaveable products and center of the plate portions. There are a lot of things that are happening, but one of the questions is, "Will that solve the problem of our production?" He said he believes it is only a small portion of our production that goes to those products. The other question is, "Can those kinds of changes happen fast enough to make a difference in the short term as it is more of a long term proposition?" Number 1030 CHAIRMAN ROKEBERG asked how long ASMI has been in existence. MR. SCHEUNEMANN said last July, ASMI celebrated their sixteenth anniversary. CHAIRMAN ROKEBERG asked if there is any way to determine the amount of imported fish into the United States. He said of the 27 percent increase in salmon consumption in the United States, how much of that was Alaskan salmon. MR. SCHEUNEMANN explained there is no doubt that they could find out how much salmon is imported. He said they would have to pull apart all the gross custom's district data and do an analysis. Mr. Scheunemann said ASMI hasn't done that. The 27 percent figure is an educated guess based on the number of units in stores they promote in. MR. SCHEUNEMANN said when ASMI goes into a retail chain, the chain signs a contract with ASMI to report their sales volume data based on that promotional time period. For example, they are currently in the Lenten period which is a typical promotion time period because during the religious period, people buy more seafood. If they contract with a retail chain like Kroger, for example, they have to report to ASMI the volume of sales movement. He noted they don't get into price or where the product comes from. Mr. Scheunemann said they then compare from period to period as to whether the volume has increased. He said when they're not promoting, they also look at whether there are continued maintenance sales of those products. During the summer months, there seems to be more interest in fresh seafood. Mr. Scheunemann explained the question that they don't have an answer to is how much carry over is there. That is a function of how much inventory is in the marketplace and how much is being sold after the promotional periods and between the seasons. Number 1156 CHAIRMAN ROKEBERG pointed out there are two different dates in the bill. "One is for the tax itself as the year 2003, and the other one is for the -- I believe is the 10 percent or less than 10 percent of the other activities of the board that expires in the year 2004. Could you explain why there is the difference of the two years?" MR. SCHEUNEMANN said he isn't clear on that rationale. CHAIRMAN ROKEBERG told Mr. Scheunemann that he is pleased that ASMI is working with the Culinary Institute of America. He asked if they have looked at other cooking schools or the Hotel Management Department of the Cornell University, which has the most well respected hotel management and culinary program curriculum in the United States. MR. SCHEUNEMANN said they haven't had contact with Cornell University. He said one of the factors of working with the Culinary Institute is that ASMI has a limited amount of money in the food service arena and what they are trying to do is rather than contacting the chefs, they are trying to contact the decision makers who are in a position who decide whether to buy product to develop the menus. It would be a good strategic direction to go if there was more money being put into food service area. He noted the Seattle Art Institute has a cooking culinary program and last month ASMI trained 40 chefs in a one day seminar. Number 1284 CHAIRMAN ROKEBERG said, "Historically, there has been a controversy about the retention of your advertising agencies. As I understand it, there is more of an Alaskan contract now. Do you want to make a very brief comment on that?" MR. SCHEUNEMANN said in January, ASMI signed up the Nerland Agency, which is a well respected Anchorage firm. He said they went through a total review process a little over a year ago and the board chose a Minneapolis based advertising agency. It didn't work out as there were internal management problems that the board couldn't have known about. Number 1356 CHAIRMAN ROKEBERG referred to the unmarketable hatchery fish, particularly the incident that occurred in Southeast Alaska last summer with the chum dump and roe stripping and asked if ASMI was involved. MR. SCHEUNEMANN explained ASMI doesn't get involved in any of those policies. He said it is a management issue and ASMI's charter doesn't include their involvement in that by statute. CHAIRMAN ROKEBERG asked if it has a negative impact on marketing. MR. SCHEUNEMANN said he thinks it has an impact, to some degree, on ASMI's relationship with the industry and not so much with the trade. CHAIRMAN ROKEBERG said he has concerns about the issue in that if poorly looked after fish are given away in a program, and they end up in the Pacific Northwest, it will reflect negatively on the rest of the industry in Alaska. Number 1394 MR. HUDSON referred to the two different dates in the bill and said he believes what they did was say, "We collected right up until 1993, and then we permit them to spend it because they collect it into the following year." CHAIRMAN ROKEBERG said he thought that was the case. Number 1496 KAY ANDREWS, Gillnetter Deck Hand, testified from Ketchikan. She said she is in support of continuing the ASMI program as it is necessary not only for processors, but also fishermen. Number 1524 DEAN PADDOCK, Executive Director, Bristol Bay Driftnetters Association, came before the committee to give testimony in support of HB 73. He said his organization feels it is necessary to advertise or die. He commended ASMI for the job that has collectively been done. Mr. Paddock referred to 1989 and said the average per capita consumption of salmon was .470 of a pound. In 1995, the consumption is 1.41 pounds per capita. The National Fisheries Institute gives credit for that to the ASMI and to the efforts of the pen rearing industry. Number 1735 JERRY MCCUNE, United Fishermen of Alaska, came forward to testify. He said 80 percent of the groups within his organization supports the 1 percent tax. The others are waiting to have board meetings to make their decisions. Number 1766 CHAIRMAN ROKEBERG closed the public hearing. Number 1770 REPRESENTATIVE COWDERY made a motion to move HB 73, with attached fiscal notes, out of committee with individual recommendations. CHAIRMAN ROKEBERG objected for the purpose of discussion. He said the fiscal note is rather high, but it is programs receipts. Chairman Rokeberg said he believes it is a very good program. He then removed his objection. Hearing no other objections, HB 73 was moved out of the House Labor and Commerce Committee. ADJOURNMENT Number 1827 CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Committee meeting at 4:47 p.m.
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