Legislature(1997 - 1998)
03/06/1997 01:10 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE March 6, 1997 1:10 p.m. MEMBERS PRESENT Representative Bill Hudson, Co-Chairman Representative Scott Ogan, Co-Chairman Representative Beverly Masek, Vice Chair Representative Ramona Barnes Representative Joe Green Representative William K. ("Bill") Williams Representative Irene Nicholia Representative Reggie Joule MEMBERS ABSENT Representative Fred Dyson COMMITTEE CALENDAR HOUSE JOINT RESOLUTION NO. 23 Relating to the seizure and sale of Alaska commercial fishing entry permits by the United States Internal Revenue Service. - MOVED HJR 23 OUT OF COMMITTEE HOUSE BILL NO. 123 "An Act relating to the repeal of the termination date of the federal tax obligation loan program under the Commercial Fishing Loan Act; and providing for an effective date." - MOVED CSHB 123(RES) OUT OF COMMITTEE *HOUSE JOINT RESOLUTION NO. 24 Relating to challenging the environmental and economic integrity of Alaska timber as Christmas decor for the United States Capitol. - MOVED CSHJR 24(RES) OUT OF COMMITTEE *HOUSE BILL NO. 151 "An Act relating to personal hunting of big game by big game guides while clients are in the field and to use area registration for portions of additional guide use areas by registered guides." - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HJR 23 SHORT TITLE: SALE OF LTD ENTRY PERMITS BY IRS SPONSOR(S): REPRESENTATIVE(S) HUDSON,Grussendorf,Ivan JRN-DATE JRN-PG ACTION 02/17/97 373 (H) READ THE FIRST TIME - REFERRAL(S) 02/17/97 373 (H) FSH, RESOURCES 02/18/97 388 (H) COSPONSOR(S): IVAN 02/24/97 (H) FSH AT 5:00 PM CAPITOL 124 02/24/97 (H) MINUTE(FSH) 02/25/97 463 (H) FSH RPT 4DP 02/25/97 463 (H) DP: AUSTERMAN, KUBINA, HODGINS, OGAN 02/25/97 463 (H) ZERO FISCAL NOTE (H.FSH/F&G) 03/06/97 (H) RES AT 1:00 PM CAPITOL 124 BILL: HB 123 SHORT TITLE: TAX OBLIGATION LOAN PROGRAM SPONSOR(S): REPRESENTATIVE(S) IVAN, Hudson JRN-DATE JRN-PG ACTION 02/10/97 294 (H) READ THE FIRST TIME - REFERRAL(S) 02/10/97 294 (H) FISHERIES, RESOURCES 02/24/97 (H) FSH AT 5:00 PM CAPITOL 124 02/24/97 (H) MINUTE(FSH) 02/24/97 455 (H) COSPONSOR(S): HUDSON 02/25/97 463 (H) FSH RPT 4DP 02/25/97 464 (H) DP: AUSTERMAN, HODGINS, KUBINA, OGAN 02/25/97 464 (H) ZERO FISCAL NOTE (DCED) 03/06/97 (H) RES AT 1:00 PM CAPITOL 124 BILL: HJR 24 SHORT TITLE: NO ALASKA CHRISTMAS TREE FOR FED. CAPITOL SPONSOR(S): REPRESENTATIVE(S) WILLIAMS, Ogan, Ryan JRN-DATE JRN-PG ACTION 02/21/97 424 (H) READ THE FIRST TIME - REFERRAL(S) 02/21/97 424 (H) RESOURCES 03/05/97 550 (H) COSPONSOR(S): OGAN 03/06/97 (H) RES AT 1:00 PM CAPITOL 124 WITNESS REGISTER BRUCE TWOMLEY, Chairman/Commissioner Commercial Fisheries Entry Commission Department of Fish and Game 8800 Glacier Highway, Suite 109 Juneau, Alaska 99801-8079 Telephone: (907) 789-6160 POSITION STATEMENT: Provided testimony on HJR 23. JERRY MCCUNE, Representative United Fishermen of Alaska 211 4th Street, Suite 112 Juneau, Alaska 99801 Telephone: (907) 586-2820 POSITION STATEMENT: Provided testimony on HJR 23 and HB 123. REPRESENTATIVE IVAN IVAN Alaska State Legislature State Capitol, Room 418 Juneau, Alaska 99801-1182 Telephone: (907) 465-4942 POSITION STATEMENT: Sponsor of HB 123. GREG WINEGAR, Juneau Lending Branch Manager Division of Investments Department of Commercial and Economic Development P.O. Box 34159 Juneau, Alaska 99803-4159 Telephone: (907) 465-2510 POSITION STATEMENT: Provided testimony for the Division of Investments on HB 123. WAYNE NICOLLS 9723 Trappers Lane Juneau, Alaska 99801 Telephone: (907) 789-5405 POSITION STATEMENT: Provided testimony on HJR 24. JIM CAPLAN, Deputy Regional Forester for Natural Resources United States Department of Agriculture - Forest Service P.O. Box 20107 Juneau, Alaska 99802 Telephone: (907) 586-8870 POSITION STATEMENT: Provided testimony on HJR 24. JACK E. PHELPS, Executive Director Alaska Forest Association, Inc. 111 Stedman, Suite 200 Ketchikan, Alaska 99901-6599 Telephone: (907) 225-6114 POSITION STATEMENT: Provided testimony on HJR 24. JED WHITTAKER Address not provided Telephone: Not provided POSITION STATEMENT: Provided testimony HJR 24. ACTION NARRATIVE TAPE 97-22, SIDE A Number 0001 CO-CHAIRMAN BILL HUDSON called the House Resources Standing Committee meeting to order at 1:10 p.m. Members present at the call to order were Representatives Hudson, Ogan, Masek, Green, Williams, Nicholia and Joule. Representative Barnes arrived at 1:12 p.m. Representative Dyson was absent because of a family illness. HJR 23 - SALE OF LTD ENTRY PERMITS BY IRS Number 073 CO-CHAIRMAN HUDSON announced the committee would hear HJR 23, Relating to the seizure and sale of Alaska commercial fishing entry permits by the United States Internal Revenue Service. Number 0195 BRUCE TWOMLEY, Chairman/Commissioner, Commercial Fisheries Entry Commission, Department of Fish and Game, came before the committee to give testimony. He informed the committee that for more than ten years the Internal Revenue Service (IRS) had attempted to seize and force the sale of limited entry permits. Therefore, it might be helpful to review what the legislature had in mind when it established limited entry permits. He explained, they were a privilege and that the state reserved the right to take them away. They were awarded initially to individual fishers, primarily Alaskan fishers, who most needed their fisheries. They were awarded on the basis of need and the permits were the means by which Alaska fishers protected their access to their traditional fisheries-that was often the case in rural communities where commercial fisheries were the only source of cash income to many residents. Limited entry permits represented both the right to work and a way of life. MR. TWOMLEY explained the permits were also important in terms of the state's enforcement of its conservation laws. The legislature thought in establishing a permanent interest in a fishery that it would give fishermen a stake in the fishery and an incentive to conserve the resource over time. "If you know your going to be there next year, there's an incentive to make sure that the fish are coming back." At the same time, the state reserved the right to take away limited entry permits from individual fishers who did not obey conservation laws. The state had a powerful enforcement tool and this was one reason why it had not been eager to have third parties, such as, the IRS, come in and take limited entry permits away; it undermines the conservation incentive. MR. TWOMLEY informed the committee members, that during the ten year period the IRS attempted to force the sale of entry permits, there had been some changes in the federal law for the IRS too. Congress attempted to make the IRS a somewhat kinder and gentler collection agency. It directed the IRS to not take items held by taxpayers when doing so would cause hardship to the tax payers. As a consequence, the IRS came to the Commercial Fisheries Entry Commission in 1992, and asked for help in collecting taxes from permit holders around the state. The commission agreed to help the IRS in any way it could without compromising state law. As a starting point, the commission pressed the IRS to provide statistics on the extent of the problem and where, geographically, in the state permit holders had this problem. The IRS produced the statistics which were both revealing and encouraging. It was encouraging because the numbers were not as great as even the IRS feared. The IRS was talking about some 4,000 Alaskan permit holders who were not in compliance with federal taxes when in fact, the number turned out to be something over 2,000. The permit holders resided all over the state-in urban and rural communities. In addition, the amount of taxes owed really wasn't terribly great. It was a manageable number. He cited 80 percent of the permit holders owed $30,000 or less which made the problem look more manageable than what was feared. Upon receiving the information from the IRS, the commission came to the legislature in 1994 and shared the statistics. The legislature responded by creating a new category of loans within the existing commercial fisheries loan program-the tax obligation loan program. These were secured loans. The legislature put a limit at $30,000, and required that an individual could only apply for one of these loans one time in their life. The legislature called for the expiration of the program in May of 1997 giving it a life of three years. MR. TWOMLEY further stated that the loan program turned out to be a very valuable tool because a number of people around the state had already been alerted to the problem and were helping, particularly in the rural communities, to bring fishers into compliance. He cited Jerry Liboff, from Dillingham and the community development quota (CDQ) outfit for the Bristol Bay Economic Development Corporation that started a local private agency in Dillingham, headed by Bernice Heyano. In addition, the Alaska Business Development Center, a quasi-public agency in Anchorage, had been tremendously helpful by working around the state in virtually every community to help fishermen come into compliance. The loan program, he reiterated, had been a very valuable tool. It had helped fishermen come forward with more hope and with less fear of the IRS. It also had generated a lot of revenue for the IRS. Mr. Twomley was trying to get current statistics from the IRS to measure the improvements from 1994. The statistics that he did have came from IRS summons. The commission, he explained, was hit with a summons that named individual permit holders identified by the IRS as non-filers for the year 1992. It included more than 2,000 individuals from communities statewide. The commission was recently hit with the same summons that applied to non-filers for the years 1993 and 1994. The numbers were down from 2,000 to 684 over the two years. There was something to show for the cooperation that had gone on for both the IRS and for the state. The bad new, however, was that the IRS was no longer managed in Alaska. The IRS Alaska district was rolled into other districts to include Hawaii, Washington and other states. It was now managed out of Seattle, Washington. Furthermore, the IRS gave the commission a terrible surprise just before Christmas, despite cooperative efforts and various commitments from the IRS. It gave the state two days notice and scheduled for sale two limited entry permits from Cook Inlet. The permits were held by individuals who needed them as a primary source of income for their families and themselves. The IRS threatened to sell the permits, valued at $30,000, for as little as $3,375. The sale was also accompanied by a written threat from the IRS Director to do more of the same. In addition, a revenue officer said that he would go to Dillingham and see some seven limited entry permits. Mr. Twomley personally received a call from an Anchorage widow who told him that a revenue officer had threatened her with the sale of her and her deceased husband's permits for as little as $3,000. In addition, the people who had been calling the revenue officers about the sales, began calling the commission. The commission had affidavits from them as to what the revenue officers told them about the sales. The affidavits said that the sales were known about at the highest level in the IRS, the Commissioners Office in Washington D.C., and that it was designed to help the IRS win its fight with the state. Finally, the affidavits said, that if the IRS could just get one of these permits transferred, it would open the flood gates to permit seizures and transfers. He was grateful to Representative Hudson for introducing the resolution. He was also grateful to Representative Ivan for introducing a bill to extend the loan program because it had been a valuable tool. Number 0842 C0-CHAIRMAN HUDSON thanked Mr. Twomley for his testimony. He summarized the contents of the bill to show justification for introducing it. C0-CHAIRMAN HUDSON explained there had been considerable action of the IRS to take $30,000 permits and to sell them for $3,000. And, in that process, it took away the opportunity for the people who owed money to earn any money to pay their obligations. There were significant changes in the tax laws at the federal level around 1989. Was that correct, Mr. Twomley? MR. TWOMLEY replied it was 1988. Number 0906 C0-CHAIRMAN HUDSON further stated that the tax laws tried to level the field on behalf of the tax payer. The resolution compliments the efforts of the Governor to try to get the congressional delegation to rein in on the IRS from actions that were not good for the interest of the public. If people owed a great deal of money and the IRS seized property that was worth more than what it could sell it for, and they took away their livelihood, the IRS loses, and the American tax payer loses. The resolution did not try to eliminate the IRS from collecting taxes that were due and payable; it just asked the congressional delegation to use any means available to them to assure that the IRS collect past due taxes from the income generated by the sale of fish and the voluntary sale of entry permits, as opposed to a seizure. And, to ensure that the IRS complied with federal law to avoid inflicting economic hardship on the tax payer while, at the same time, protecting the fishing privileges and the right to work by Alaska fishermen. The limited entry permit was an effort to try to manage the fisheries and to provide an opportunity for people who had fished for a long period of time to continue that type of livelihood. He reiterated the resolution was complimentary. It was a strong appeal on the part of the legislature and a strong statement to the congressional delegation. It would be useful to the congressional delegation when they went to the IRS because they could say that the people of Alaska, who had spoken through the legislative process, were offended by the sale of permits that were valued at $30,000 and sold for $3,000, and by taking away the livelihood that the people needed to pay their taxes. Number 1040 REPRESENTATIVE JOE GREEN asked Co-Chairman Hudson if he was ready for questions? C0-CHAIRMAN HUDSON replied he was ready for questions either way. REPRESENTATIVE GREEN stated this seemed like a worthwhile endeavor. He wondered if the state of Washington was doing something similar to add to the movement, because Alaska was in constant competition with fishermen from Washington. Number 1063 MR. TWOMLEY replied he did not know if there was specific action in Washington. He did know that the actions by the IRS had been directed at Alaskan fishermen-exclusively-as far as he could see. "And, so we have a problem here that largely resides in our communities." Number 1085 C0-CHAIRMAN HUDSON stated that the permits were the province of the state of Alaska so by taking this action it called for an even playing field on behalf of the fishermen and women. It also guaranteed that the use and the control of the limited entry permit was maintained on Alaska's behalf. Number 1106 REPRESENTATIVE GREEN stated there were several out-of-state permits granted. Mr. Twomley indicated that the IRS targeted only Alaskan fishermen rather than all of the people who had an Alaskan permit. MR. TWOMLEY replied, to date, the only enforcement action had been directed towards Alaskan resident entry permit holders. Number 1127 REPRESENTATIVE GREEN asked, wouldn't that smack of prejudicial treatment and wouldn't that be held unconstitutional by singling out Alaskan residents rather than Alaskan permits? If that was the case, it would strengthen the resolution. He suggested that the legislature look into very serious actions against the IRS. Number 1151 C0-CHAIRMAN HUDSON said he was not an attorney, but that was a valid point. Number 1157 MR. TWOMLEY stated one of the requests from the resolution was that the IRS simply observe federal law. It was the restraining elements of the federal law that would keep the IRS from causing hardship to the tax payer. The resolution would help all tax payers, as a result, throughout the United States. It served a general purpose by keeping the IRS honest under those restraints. Number 1198 REPRESENTATIVE GREEN stated he belonged to the Energy Council which got its clout as a result of the union of several states; it spoke in one accord. Therefore, "We would get more bang for our buck, I would think, if we could get through the Washington Legislature a similar thing, since it affects-certainly should-affect some of their citizens as well. And, from that stand point, I think, we would have a little more clout against the IRS than just this resource state that's way up in the North Pole that nobody really cares much about back in Washington." Number 1232 C0-CHAIRMAN HUDSON stated his intentions, as a representative of the people of Alaska, were to try to protect the livelihoods and the interests of the constituents; and at the same time, to try to protect the limited entry permits. He would like to see if there was any overt discrimination against Alaskans. He did not want to slow down the resolution, however. If there was discrimination, then there should be additional proceedings through the court from the attorney general. It was a very good point. He thanked Representative Green for bringing it up. Number 1313 JERRY MCCUNE, Representative, United Fishermen of Alaska, was the first person to testify in Juneau. He stated that the United Fishermen of Alaska were being targeted unfairly as Representative Green pointed out. The IRS had many avenues to collect money. And, one was to not take a person's livelihood away. The IRS could take boats, it could make arrangements while one was fishing to pay the back-taxes, or one could voluntarily sell a permit and other assets. "I think it's just a thing that the IRS has been trying to do for 10 years and they want to break the barrier to get their hands on these permits because they know they sell them real cheap and fast, and it might not be to state residents either." The United Fishermen of Alaska, he declared, did not support people not filing or paying their taxes or not making arrangements with the IRS to try to attempt to pay their taxes. Number 1391 C0-CHAIRMAN HUDSON stated he would like to move the resolution out of the committee. Number 1404 REPRESENTATIVE GREEN moved that HJR 23 move from the committee with individual recommendations and the attached zero fiscal note. There was no objection, HJR 23 was so moved from the House Resources Standing Committee. HB 123 - TAX OBLIGATION LOAN PROGRAM C0-CHAIRMAN HUDSON announced the committee would hear HB 123, "An Act relating to the repeal of the termination date of the federal tax obligation loan program under the Commercial Fishing Loan Act; and providing for an effective date." Number 1443 REPRESENTATIVE IVAN IVAN, Alaska State Legislature, explained the bill repealed the termination date of the federal tax obligation loan program that was under the Commercial Fishing Loan Act. This program was due to sunset on May 26, 1997. Thus far, 207 loans had been made to fishermen who otherwise would have lost or possibly could have lost their limited entry permits through actions taken by the Internal Revenue Service-the seizure of permits for the payment of delinquent taxes. REPRESENTATIVE IVAN further stated that Mr. Twomley provided a good overview earlier on touching parts of HB 123 and its intent. It certainly impacted the Dillingham area, the rest of rural Alaska and the entire state of Alaska. The incident on December 11, 1996 when the state was blind sided by the IRS by giving only two days notice and by conducting a pre-Christmas sale of an Alaskan limited entry permit affected a 54 year old Alaskan Native fisherman from a small coastal community. The value of the permit was $30,000 but it was sold for about $5,000. It was a sad time for the family, and it affected the people throughout rural Alaska with high unemployment because commercial fishing is the means for most to gain an annual income. REPRESENTATIVE IVAN further stated that there were people from the Division of Investment here today to answer any technical questions. Number 1584 GREG WINEGAR, Juneau Lending Branch Manager, Division of Investments, Department of Commercial and Economic Development, explained the agency administered the tax obligation program that would sunset if the bill did not pass. The program was established three years ago because there were a number of Alaskan commercial fishers that were having a tough time with the IRS and were in danger of having their permits repossessed. The program had been very successful. The division had assisted over 200 individuals by protecting their permits and their way of making a living. He believed that there was still a need for the program, to a lesser extent, because of progress. There was a fairly high delinquency rate with the program-33 percent. Of that 33 percent, all but 11 percent either had a work out in progress or an extension that would cure the delinquency. He also noted that the loans were fully secure in the event a delinquency could not be resolved. The program, he explained, was a revolving fund. The division had not received any general fund money since 1985. Essentially, the division loaned money that it received back from re-payments. It worked out to about $15 million per year. Mr. Winegar explained the division submitted a zero fiscal note, and he would be willing to answer any questions from the committee members. Number 1675 REPRESENTATIVE GREEN asked Mr. Winegar if the loans were secured against the vessels, something tangible, or were they secured against the permit valuation? Number 1687 MR. WINEGAR replied it was a variety of things. Many times it was the permit. The division was also able to take vessels, gear and real estate as well. It varied from case to case. Number 1698 REPRESENTATIVE GREEN asked Mr. Winegar if the loans were low interest loans or no-interest loans? Number 1704 MR. WINEGAR replied the rate of interest, at this time, was 10.5 percent. It was tied to the prime rate; it was the prime rate plus two, not to exceed 10.5 percent. Number 1716 REPRESENTATIVE GREEN replied that was pretty hefty. He wondered if the fiscal note should be positive rather than zero. "Because, in effect, what your saying is your extending the time but that also means the additional interest that the state would get." That was a horrible way to get revenue, assuming it would be repaid. He asked Mr. Winegar, if there was a statement that would make this even better; or did he figure, if it was a zero fiscal note then the division did not need anything better than that? Number 1745 MR. WINEGAR replied the division was comfortable with the bill the way it was. The division had a limited amount of money to deal with and sometimes it was a matter of priorities as far as what the money was used for. Number 1762 REPRESENTATIVE GREEN asked Mr. Winegar if the 11 percent of the 33 percent mentioned earlier was one-third of the one-third, or was it one-third of the total? MR. WINEGAR replied it was 11 percent of the total. Number 1774 REPRESENTATIVE GREEN responded it was one-third of those that were outstanding. That was a pretty low failure rate. He asked Mr. Winegar how that compared to the Alaska State Student Loan? Number 1779 MR. WINEGAR replied he was not familiar with the student loan rates. The loans of the division were more risky and running higher than the normal loans. The division was able to work with the people throughout the extension process and/or work out, in most cases, to resolve the problems. Number 1793 REPRESENTATIVE GREEN explained that the state made great efforts to educate its children through the student loan. The forfeiture rate was abominable, until foreclosure was implemented. He was not indicating that for the fishers loan, however, because a 10 percent plus interest rate and an 11 percent failure rate was a good deal. Number 1847 C0-CHAIRMAN HUDSON replied that he agreed. There were many reasons that the fishermen and women of Alaska were finding themselves in economic disrepair and following behind in their obligations, including taxes. The largest reason was the extreme competition from the farmed salmon in Chile, Norway, Canada and other parts of the world; and the break down of the old Soviet Union where the Japanese were investing heavily in the same fisheries that were available in Alaska. Therefore, the program that was being described here today was valuable; it was an economic incentive to some sorts, it was not falling into great economic problems, and it was self-perpetuating. Number 1893 C0-CHAIRMAN SCOTT OGAN asked Mr. Winegar at what point did he expect write-offs? The issue was discussed in the last committee. Number 1937 MR. WINEGAR replied eventually the division did expect losses which was inevitable with any loan program. "We bend over backwards to try and work with the harvester, and really the foreclosure I would say, is a very last resort for us." There were going to be cases at some point where the division would need to cover the funds, but it had not happened, yet. The division hoped it would be a small number of times that it would need to do that. Number 1958 C0-CHAIRMAN OGAN announced he had an amendment to the bill. He was concerned because the state, too often, stepped in to help people who did not perform to pay their taxes. He would support moving the bill out of the committee, however. Number 1997 REPRESENTATIVE RAMONA BARNES asked Mr. Winegar what was the collateral for the loans? Number 2005 MR. WINEGAR replied many times it was the permit itself, but it could also be a vessel, real estate or other assets of the harvester. It varied from case to case. Number 2011 REPRESENTATIVE BARNES said, "Then you wouldn't write off a loan just to forgive it, you would take something in collateral, always?" Number 2019 MR. WINEGAR replied, "Yes, that's correct." In fact, it was required by statute that the division did that. Number 2024 REPRESENTATIVE BARNES stated that she was having serious problems with the bill because other Alaskans that had financial difficulties either got an extension on their taxes, or something, to carry them over. "It seems like every time the commercial fishermen get in trouble that we find a way to bail them out. We don't find a way to bail out other Alaskans." She agreed with the bill, when it was originally put on the books, but to see a bill to extend the program gave her serious problems. She asked Mr. Winegar how many more of these types of loans did he foresee in the future? Number 2061 MR. WINEGAR replied one of the stipulations of the original piece of legislation was the once-in-a-lifetime opportunity to take advantage of the program. There was concern of the people asking for a loan every time that he or she had a tax problem. Part of the problem, however, was trying to reach as many of the folks as possible because many were scattered around the state. The idea of the extension would be to try to reach more individuals. Number 2083 REPRESENTATIVE BARNES asked Mr. Winegar why was it the obligation of the state to reach these individuals? They knew they owed taxes. Number 2093 MR. WINEGAR replied he did not know that it was an obligation as so much as there was a program that gave an opportunity for harvesters to protect their livelihood. Number 2102 REPRESENTATIVE BARNES stated that she appreciated the original intent of the program. However, if one of her constituents failed to pay his taxes, the IRS could take his automobile, for example, which was the means that got him back and forth to work. The IRS could take anything else that he owned. "We're not doing anything to help those Alaskans." That was their livelihood. Number 2131 C0-CHAIRMAN OGAN stated that the IRS often took things without due process. "It's the only governmental organization that takes first, and then you come in and prove why you don't need them to take what they've already taken from you." Number 2158 JERRY MCCUNE, Representative , United Fishermen of Alaska, was the first person to testify in Juneau on HB 123. The United Fishermen of Alaska supported the bill. "We don't think it should be, you know, going on for the next 25 years. People have to realize their obligations, and realize that they're going to have to make arrangements to file and pay their taxes. We see that improvement through the program as previously testified." Not too long ago it was passed in statute that the IRS could not take their livelihood away; therefore, the answer to Representative Barnes' question was, "No." The United Fishermen of Alaska were trying to protect the limited entry system, to keep the limited entry permits in Alaska, and to inform folks about the program. The fishing organizations were encouraging people to talk to the IRS, to file, and to try to budget, which was tough with the prices the past five years. He reiterated that the United Fishermen of Alaska supported the program, for whatever time the legislature saw fit that the state no longer needed it, and its extension for now. Number 2242 C0-CHAIRMAN HUDSON asked Representative Ogan to introduce his amendment. Number 2249 C0-CHAIRMAN OGAN moved Amendment 1, 0-LS0538/A.1, Cramer/Utermohle, 3/6/97. It deleted all of the material of the original bill and extended the program from "three" years to "eight" years, extending its life another five years. Number 2273 REPRESENTATIVE BARNES objected. Another five year extension was too much. A person that owed $30,000 had to have made a lot of money and had to have had a lot of write offs. "So, to extend this for another five years is just about more than I can swallow so I'd have to vote against this amendment." Number 2307 REPRESENTATIVE BILL WILLIAMS said he supported Amendment 1. The fishing industry was one of the largest industries that employed the people of Alaska and the fishermen were part of that industry. Therefore, we should try to help the fishermen as much as we can; and if it meant another five years, especially when it was down on its knees because of the salmon glut in the world, I think we had to do something to that effect. Number 2352 REPRESENTATIVE GREEN said he supported Amendment 1. The state had recently made incentive moves in the petroleum field to keep people employed in the state even if it meant sacrificing some of its earnings. The alternative of not doing something like this, whether it was a meritorious loan or not, was bankruptcy and unemployment which did not help anybody or the state. If there were people willing to try to make amends for a very bad situation, such as, when the oil prices were low, the state could ultimately end up on a business venture that was not of the best interest. It was a risk that the state needed to take. If every time the state got involved to encourage "entrepreneurialship" and the legislature hammered those that were willing to take that risk it sent a bad message. The legislature had to look at this a little different than if it was the board of directors of bank A, for example. It was a good idea to put a limit and a tendency to revisit it. If eight years was too long, he could see five years. C0-CHAIRMAN HUDSON asked Co-Chairman Ogan to speak to the issue of how many years Amendment 1 extended the program. Number 2453 C0-CHAIRMAN OGAN replied Amendment 1 changed the bill to eight years with a net effect of five years from the original expiration date. Amendment 1 extended the bill for another five years total. TAPE 97-22, SIDE B Number 0001 REPRESENTATIVE GREEN stated there should be an end-point at some time. Number 0011 REPRESENTATIVE BARNES stated that she did not have a problem with extending it. She had a problem with extending it for five years, however. "I think that there's lots and lots of other businesses out there, certainly the oil industry serves a great many Alaskans, and our fishing community also serves some Alaskans, but they also serve a great number of out-of-state people as well, so is the oil industry. And, we're working to try to turn that around." In the case of the fishing industry, there was not much that the state could do to turn that around because many of the permits were owned by people that did not live in Alaska. She personally had worked and would continue to work to open up new markets to sell Alaskan fish in. "I want to see our fishing industry succeed, but I believe that just making something this long a period of time after it has already been in existence for three years, is a little bit too much." Number 0062 REPRESENTATIVE IVAN announced he concurred with Amendment 1, to extend the program up to five years; and he was speaking for rural Alaska. Number 0074 C0-CHAIRMAN HUDSON asked Mr. Winegar, from his perspective, where were most of the delinquent accounts held? Were they principally held in rural Alaska or were they all over the state? Number 0089 MR. WINEGAR replied they were spread around the state. The division's portfolio had a lot of loans in rural Alaska, therefore, the percentages would be higher in rural areas. C0-CHAIRMAN HUDSON asked Mr. Winegar if he would say any particular part of rural Alaska? MR. WINEGAR replied he had not analyzed it to that extent. Number 0106 C0-CHAIRMAN HUDSON stated several years ago a lot of it was in Bristol Bay and on the West coast of Alaska. That was when the legislature first started looking at whether or not it was worthwhile to create a loan to help these people maintain their livelihoods, while at the same time, being responsible for their taxes. Number 0122 REPRESENTATIVE GREEN asked Mr. Winegar if the loan was being made to non-Alaskan residents or just Alaskan residents? MR. WINEGAR replied it was strictly residents. In fact, residents that had been here for the last two years. Number 0132 REPRESENTATIVE BARNES moved that the word "eight" be changed to "six." This would, in effect, give the program another three years of life. Number 0173 REPRESENTATIVE IVAN replied his bottom-line interest was to continue the program. He had hoped it would be extended another five years, but he also understood the concerns expressed today. C0-CHAIRMAN HUDSON asked Representative Ivan if he was willing to accept the amendment? REPRESENTATIVE IVAN replied, "Yes." C0-CHAIRMAN HUDSON asked if there was any objection to the motion to amend Amendment 1. There was no objection. C0-CHAIRMAN HUDSON called for a motion to move Amendment 1, as amended. Number 0200 REPRESENTATIVE BARNES moved that Amendment 1, as amended, be adopted. There was no objection. Number 0244 REPRESENTATIVE BARNES moved that HB 123, as amended, move from the committee with individual recommendations and attached fiscal note(s). There was no objection, CSHB 123(RES) was so moved from the House Resources Standing Committee. HJR 24 - NO ALASKA CHRISTMAS TREE FOR FED. CAPITOL The next order of business to come before the House Resources Standing Committee was HJR 24, Relating to challenging the environmental and economic integrity of Alaska timber as Christmas decor for the United States Capitol. CO-CHAIRMAN HUDSON called on Representative Bill Williams, sponsor of HJR 24, to present the resolution. Number 0265 REPRESENTATIVE WILLIAMS read the following sponsor statement into the record: "House Joint Resolution 24 was introduced in response to the Clinton Administration's proposal to harvest trees from the Tongass National Forest for the purpose of decorating the nation's capital during the 1998 Christmas season. "Under normal circumstances this proposal would be met with open arms and be considered an honor by the people who live and work in the Forest. However, these are not normal circumstances. Federal policy decisions, the inability of the Forest Service to get timber volume out, and litigation has led to mill closures, widespread job loss and economic depression, not to mention the associated negative socio-economic impacts. "I consider the proposal a direct insult to the people of Southeast Alaska. These are people who are prohibited from making an honest living in the woods, yet are asked to harvest Christmas trees, send them back east AND fund the project. At a time when we need every single dollar we have to try and rebuild our economy it is incredible that the Federal Government would ask us to fund such a project. "We need to send a strong message to Washington that says we do not agree with their actions regarding the Tongass National Forest. The human cost of `saving the Tongass' has been too high. We do not agree with their taking of trees for decorative purposes while the jobless citizens of Southeast Alaska try to scrape enough money together to save their homes and dreams. I urge you to support House Joint Resolution 24." CO-CHAIRMAN HUDSON explained Representative Williams also had an amendment to the resolution. He asked him to explain it to the committee members. REPRESENTATIVE WILLIAMS moved that Amendment 1 be adopted. REPRESENTATIVE WILLIAMS explained that Amendment 1 made the resolution more clear by adding figures to it. CO-CHAIRMAN HUDSON stated Amendment 1 made it current with the recent action taken by the Forest Service and the Ketchikan Pulp Mill. REPRESENTATIVE WILLIAMS further explained that he hoped the resolution would allow for media coverage in Alaska and the rest of the country so that it would be understood what was happening in the Tongass National Forest. The forest for the past six to eight years had been managed by political science. "What we would like to do is to be able to manage the Tongass in the right manner with regular science." CO-CHAIRMAN HUDSON asked the committee members if there was any objection to the motion to adopt Amendment 1? There was no objection, Amendment 1 was so adopted. Number 0486 WAYNE NICOLLS was the first person to testify in Juneau. He was here testifying on behalf of himself today. He apologized to Representative Williams if his remarks appeared contradictory to him because he had never opposed him before. But, he did want to present a clear picture of the Christmas Tree Project. This resolution was poor timing given the circumstances of the Tongass National Forest. Many knew that the Tongass could produce several times more than whatever the level would come out of the Tongass plan. "It's tragic to have the job loss and to have the productivity that's potentially lost and the potential for a thriving and a growing forest products industry instead of having it shut down." MR. NICOLLS further explained that before political correctness it was called the Capital Christmas Tree and more appropriately it was called the people's tree. It was started and sustained by the people's forest service to supply the people's tree from the people's forest. The honor and the privilege of supplying the tree required years of effort and determination, of which, none was political. Therefore, he hoped that the legislature would speak for the people. Since the beginning, tax payer's money had only been used sparingly for a small part of salaries and expenses. The employees contributed many unpaid hours. It was mostly supported by volunteers and donations. Mr. Nicolls had a vested interest in the program because he was part of the group that started the program. In 1996, the project tried to get a tree to commemorate the silver anniversary of the Alaska Native Claims Settlement Act, Sealaska, the centennial of the Bonanza Creek discovery, and the eve of the 90th anniversary of the Tongass National Forest. The effort was lost to the state of Utah because of the golden spike significance and the state's centennial. MR. NICOLLS further stated that the nomination and selection for the capital tree was a deliberate, long-term and highly competitive process. It was similar on a grand scale for shopping for the perfect Christmas tree with his wife. The honors and privileges that it brought to the people were significant. The final selection was made by the nation's arborist, who was responsible for even the temporary flora in the nation's capital. Several communities usually participated. The Petersburg Chamber pledged in 1995 the transportation funds, if the tree was selected from Alaska. Furthermore, as many as 60 smaller trees went along for various Washington D.C. locations, such as, the Supreme Court building; none went to the White House. The tree in the White House was the winner among the Christmas tree growers in the Lower Forty-Eight. It was not connected with the capital trees. If there was the opportunity again, it was a chance to showcase Alaska, its forests, its productive potentials, and the results of its productive management. For example, the best specimen would probably come from a second growth area providing a positive message. MR. NICOLLS wished the committee members well in their decision. "I hope that our message does get through that we're being put upon." Number 0824 REPRESENTATIVE GREEN explained under different circumstances he would agree 100 percent with the testimony from Mr. Nicolls. However, he found that the results of the executive order were repugnant. The resolution probably would not do any good, but neither would sending the trees. "We have an administration in Washington that really doesn't care about Alaska. They have shown that. They don't care about small states. They're willing to just about sell out anybody that has only a 3 or a 4 congressional delegation and cater to those environmentally oriented states back East that have 30 to 50 electoral votes." He supported the resolution. Number 0907 MR. NICOLLS replied he was happy to be retired from the forest service so that he could unabashedly agree with Representative Green's statements. CO-CHAIRMAN OGAN wondered, for the record, if Mr. Nicolls was not retired would he not have said that. MR. NICOLLS responded he probably would have said it anyway. Number 0941 JIM CAPLAN, Deputy Regional Forester for Natural Resources, United States Department of Agriculture - Forest Service, was the next person to testify in Juneau. He explained he was here to answer any questions about the process. He had handled the program for three years at the Washington D.C. end of the pipeline. He declared, if the people of Southeast Alaska did not want this type of activity to go on, it would not go on. It was that simple. The tree was not due in Washington D.C. until 1998, therefore, another tree from another forest could be substituted. Number 0992 REPRESENTATIVE IRENE NICHOLIA asked Mr. Caplan who paid for the transportation of the trees? MR. CAPLAN replied it was paid for by voluntary contributions from the communities and cooperators. For instance, Silver Bay Logging offered to aerial lift the trees as a contribution. He cited Mac Trucks and Harley Davidson as companies that had participated and contributed as well. Sometimes the communities were able to raise a great bit of money but a lot of times it was a combination of contributors. Number 1045 REPRESENTATIVE NICHOLIA asked Mr. Caplan if he had received any reactions from the Southeast communities? Number 1056 MR. CAPLAN replied some communities were very upset and others were supportive. The program was not intended to create conflict between communities or within communities. However, it had been difficult to decide if there was any community consensus. Number 1085 REPRESENTATIVE BARNES asked Mr. Caplan what was his job? MR. CAPLAN replied he was the Deputy Regional Forester for Natural Resources here in Alaska. REPRESENTATIVE BARNES stated, "So, you're not retired?" MR. CAPLAN replied he was not retired and did not plan to be real soon, but after today it could happen. Number 1106 REPRESENTATIVE BARNES replied she was not so sure that it would happen to him because he did a fine job with the party line. The federal administration would not have any reason to retire him early. MR. CAPLAN replied he appreciated the remarks of Representative Barnes. REPRESENTATIVE BARNES further stated that the people of Alaska would very much like to have a tree from Alaska displayed in the United States capital. However, she also believed that Washington D.C. needed to understand that a tree was significant to Alaska for many reasons. The city of Kotzebue used to have one tree that was stolen. And, for years the people of Kotzebue tended to that tree. The people of Southeast lived off of the forest and when their livelihood was shut down the way it had been, it meant that some children would not be able to eat. "And, so if the only protest that they have is to say: `Well we would very much like you to have our tree,' we can't in good faith do that because you've put our people out of work. Thus, they can't feed their families, or cloth their children, or do the things that they need to do." Number 1195 CO-CHAIRMAN OGAN stated that he would find great pleasure if the national media picked up on this issue. He also hoped that the other areas that were solicited would not provide a tree sending a greater message from the people living and working in the forest that they had enough of the "war on the West." "With all due respect, Sir, I hope they won't find a tree for Washington." Number 1237 CO-CHAIRMAN HUDSON stated, for the record, that he had known Mr. Caplan for a number of years and he did not know anybody more honorable, professional, or more caring and concerned about Alaska; so, he would like to see him keep his job. MR. CAPLAN replied "Thank you, Mr. Chairman. I appreciate it." Number 1255 REPRESENTATIVE GREEN suggested to Mr. Caplan, if he really wanted to find out what the people in the affected communities thought, to pass out a contribution hat in Wrangell and Ketchikan to help pay for the transportation of the trees out East. "I'm afraid that they would be a little less civil than we are being here." Number 1307 REPRESENTATIVE REGGIE JOULE replied that the tree in Kotzebue was a national forest complete with a white picket fence around it. Furthermore, as a kid he grew up hearing about the White House and the big deal about the Christmas tree and he wondered if Alaska would ever get that. "I never thought we had trees because I figured the Tlingit were the first ones across the land bridge, they clear-cutted and made canoes out of all of them and left the rest of us stranded." REPRESENTATIVE JOULE further stated that he always had hoped that Alaska would have the distinct honor of placing a Christmas tree in the nations capital. But, it was a little frustrating to be put into this kind of light; and in any other circumstances it would be an honor. Maybe, if there was another place in Alaska that could do this, it could be considered. However, with the situation as it was, he would support the resolution even though it seemed in some ways mean spirited. The point needed to be made, however, and this was one way to do it. Number 1459 JACK E. PHELPS, Executive Director, Alaska Forest Association, Inc., was the next person to testify in Juneau. He appreciated the resolution and the comments today made by a few of the members of the committee. It was important for the committee members to recognize that the process began by the Forest Service in 1993 which was the year that Alaska lost the Sitka pulp mill. At that time no one believed that the state would loose the Wrangell mill and the Ketchikan pulp mill as well. Therefore, this was an unfortunate and ironic turn of events since at one time there was community support. "It's unfortunate that larch doesn't grow in Southeast Alaska because larch was a conifer that loses its needles in the winter and maybe it would be really appropriate for us to send a larch back there to decorate the nations capital." It would be symbolic of what had happened to the industry - death. Under the current administration, we were back to pre-Magna Charta England - the king's forest rather than the people's forest as Mr. Nicolls stated earlier. That was the problem throughout the public land states in the western half of the United States. "We are being told we cannot encroach on the king's forest." The Alaska State Legislature should be applauded for trying to make a statement with this resolution. He urged its speedy passage from both sides of the aisle. Number 1641 JED WHITTAKER was the next person to testify in Juneau. He objected to the "politicalization" of Christmas. He explained Christmas was a time for giving, a time that brought out the best of everyone, and a time for sharing to become the best that one could be as a human. He understood and shared the outrage of Representative Williams of the injustice of the Clinton Administration's actions on the Tongass. However, the resolution did not show the best that Alaskans could be to the rest of the nation by politicizing Christmas. Representative Williams was well intended, however, he did not think that this was a proper course of action. It was an abuse of public monies to even discuss something like this. "I was listening to you all give various platitudes and jokes and whatnot. And, I would have to remind you that this is a public hearing and you're supposed to be hearing from the public. You have much opportunity to deliberate about your very important decision about objecting to Christmas trees after the public hearing." In conclusion, Christmas was not about politics and Christmas trees were not about politics. It was a time to put politics to rest. "I would hope that you can find it in your heart to do what is best for both Alaska and the nation." Number 1821 REPRESENTATIVE WILLIAMS asked Co-Chair Hudson if the letter from John Conley, Member, Ketchikan Gateway Borough Assembly, could be added to the record? There was no objection, it was so added to the committee file. Number 1854 REPRESENTATIVE BARNES moved and asked unanimous consent that HJR 24, as amended, move from the committee with the attached zero fiscal note and individual recommendations. There was no objection, CSHJR 24(RES) was so moved from the House Resources Standing Committee. ADJOURNMENT Number 1888 CO-CHAIRMAN HUDSON adjourned the House Resources Standing Committee meeting at 2:36 p.m.