Legislature(1993 - 1994)
05/04/1993 03:10 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
May 4, 1993
3:10 p.m.
TAPES
SFC-93, #72, Side 2 (075-end)
SFC-93, #74, Side 1 (000-355)
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 3:10 p.m.
PRESENT
In addition to Co-chairs Frank and Pearce, Senators Jacko,
Kelly, Kerttula, Rieger, and Sharp were present.
ALSO ATTENDING: Senator Salo, Representative Bill Moses,
Bill Stoltze, staff for Representative Ed Willis; Charles
Cole, Attorney General, Department of Law; Kim Elton,
Executive Director, Alaska Seafood Marketing Institute;
Representative Bill Hudson, sponsor of HB 275; Jerry McCune,
President, United Fisherman of Alaska; Dean Paddock, Bristol
Bay Driftnetters Assoc.; Mike Greany, Director, and Dave
Tonkovich, Fiscal Analyst, Legislative Finance Division; and
aides to committee members.
SUMMARY INFORMATION
CSHB 264(FIN) - An Act levying and providing for the
collection of and disposition of the
proceeds of a fishery resource landing
tax; and providing for an effective
date.
Attorney General Charles Cole spoke to
CSHB 264(FIN). Discussion was had by
Senators Rieger, Kelly, and Mr. Cole.
Senator Kelly MOVED amendment 1. It
FAILED on a vote of 4-3. CSHB 264(FIN)
was REPORTED OUT of committee with a "do
pass" and with a fiscal note for Dept.
of Revenue for $94.0 and for the Dept.
of Commerce & Economic Development for
$860.0. Senators Kelly and Kerttula
signed a "no recommendation." Co-chairs
Pearce and Frank, Senators Rieger,
Jacko, and Sharp signed "do pass."
CSHB 275(FIN) am - An Act relating to the Alaska Seafood
Marketing Institute and a salmon
marketing tax; and providing for an
effective date.
Testimony was heard by Kim Elton, Alaska
Seafood Marketing Institute;
Representative Bill Hudson, sponsor of
HB 275; Jerry McCune, President, United
Fisherman of Alaska; Dean Paddock,
Bristol Bay Driftnetters Assoc., and
Senator Salo in support of CSHB 275(FIN)
am. Amendment 1 and 3 were ADOPTED.
Amendment 2 by Senator Jacko FAILED.
SCSCSHB 275(FIN) was REPORTED OUT of
committee with a "no recommendation" and
with a fiscal note for Dept. of Commerce
& Economic Development for $5,640.3 and
the Dept. of Revenue for $109.7 and
revenue of $5,750.0. Co-chairs Frank
and Pearce signed "do pass." Senators
Sharp, Rieger, and Kerttula signed "no
recommendation." Senators Jacko and
Kelly signed "do not pass."
HJR 27 - Relating to an amendment to the
Constitution of the United States
prohibiting desecration of the Flag of
the United States.
Testimony was heard in support of HJR 27
by Bill Stoltze, staff for
Representative Ed Willis. HJR 27 was
REPORTED OUT of committee with a "do
pass." Senators Sharp, Jacko, Kelly,
Kerttula and Co-chair Frank signed "do
pass." Senator Rieger and Co-chair
Pearce signed "no recommendation."
Bills scheduled but not heard:
CSHB 82(FIN) - An Act relating to school construction
grants and major maintenance grants to
school districts; providing for school
district participation in the cost of
school construction and major
maintenance; creating a major
maintenance grant fund; creating an
education facilities maintenance and
construction fund; and providing for an
effective date.
CSHB 124(FIN) - An Act establishing capital project
matching grant programs for
municipalities and unincorporated
communities; and providing for an
effective date.
CSHB 179(FIN) am - An Act relating to motor vehicles and
mobile homes; and providing for an
effective date.
CS FOR HOUSE BILL NO. 264(FIN):
An Act levying and providing for the collection of and
disposition of the proceeds of a fishery resource
landing tax; and providing for an effective date.
CO-CHAIR DRUE PEARCE announced that CSHB 264(FIN) was before
the committee. She invited Charles Cole, Attorney General,
Department of Law, to speak to the bill.
CHARLES COLE said that he had been reading advance sheets
for the Supreme Court. He described one case that he hoped
would enable the committee to evaluate the constitutionality
of the tax as set forth in CSHB 264(FIN). The case was ITEL
Containers International Corp. petitioner vs. Joe
Huddleston, Commissioner of Revenue, State of Tennessee. He
felt the case was interesting because it involved a tax
imposed by the state of Tennessee on containers which were
delivered by lessees or their agents in many states,
including Tennessee. In the course of the Supreme Court's
opinion it said that the state rejected the argument that
the tax created a substantial risk of international multiple
taxation because the taxes were imposed on a discreet
transaction, the transferred possession of cargo containers
within Tennessee. So it did not risk multiple taxation or
impede federal regulation or foreign trade. In CSHB
264(FIN) the proposed tax is also upon a discreet
transaction which takes place entirely in the state of
Alaska, the first landing of fish products. This Alaska tax
is similar to the tax in the aforementioned case. In
further describing the case, he said the Supreme Court, in
the course of its opinion, said the state tax satisfied
complete domestic commerce law tests "when the tax is
applied to an activity and when a substantial nexus within
the taxing state is fairly apportioned, does not
discriminate against interstate commerce and is fairly
related to the services provided by the state." The Supreme
Court had no trouble in its opinion finding this Tennessee
tax satisfied those four tests. It said, therefore, that
there was a substantial nexus, the tax was fairly
apportioned, that it did not discriminate against interstate
commerce, and was fairly related to the services provided by
the state. The Court went on to say that the tax is a fair
measure of the state's contact within the given commercial
transaction in all four aspects. This complete auto-test
confirmed both the state's legitimate interest in taxing the
transaction and the absence of an attempt to interfere with
the free flow of commerce be it foreign or domestic. The
Court went on to discuss international aspects of the tax
and had no problem with those. He said that based on this
case in the United States Supreme Court dated February 1993,
and the lines of authority cited in it, that the tax found
in this bill, while not entirely free from the tax on
domestic and foreign commerce clauses of the United States
Constitution, in his view, withstood these tests.
SENATOR STEVE RIEGER asked if there was a distinction made
whether the tax is imposed on the landing or on the fish.
Mr. Cole said that the tax is a landing tax not on the fish.
It is an event with substantial nexus with the state of
Alaska.
SENATOR TIM KELLY MOVED amendment 1 (copy on file). Senator
Kelly spoke in support of the amendment which gave a tax
credit for those who have been funding the Bering Sea
Foundation. SENATOR JACKO OBJECTED. Senator Jacko said
that this amendment was not necessary for this piece of
legislation and that he had drafted another bill that would
address this issue. Co-chair Pearce called for a show of
hands and the amendment FAILED to be adopted on a vote of 4
to 3. Senators Kelly, Pearce and Kerttula were in support
of the amendment. Senators Frank, Rieger, Jacko, and Sharp
were opposed.
Senator Jacko MOVED for passage of CSHB 264(FIN) from
committee with individual recommendations. No objections
being heard, CSHB 264(FIN) was REPORTED OUT of committee
with a "do pass," and with a fiscal note for the Department
of Revenue for $94.0, and a fiscal note for the Department
of Commerce & Economic Development for $860.0. Co-chair
Frank, Senators Jacko, Rieger, and Sharp voted "do pass."
Co-chair Pearce, Senators Kerttula and Kelly voted "no
recommendation."
CS FOR HOUSE BILL NO. 275(FIN) am:
An Act relating to the Alaska Seafood Marketing
Institute and a salmon marketing tax; and providing for
an effective date.
Co-chair Pearce invited Kim Elton, Executive Director,
Alaska Seafood Marketing Institute, to join the committee at
the table and speak to CSHB 275(FIN) am.
KIM ELTON spoke to the sections of CSHB 275(FIN) am.
Senator Kelly asked what changes had been made to the bill
in the Senate version. Mr. Elton said that one of the
changes provided for a separate salmon committee that would
advise the whole board on the salmon marketing program. He
also believed that a change had been made to the salmon
enhancement tax legislation. Senator Kelly asked if a
public member had been reinstated to the board. Mr. Elton
answered affirmatively. Mr. Elton said that United
Fisherman of Alaska (UFA) are interested in amending this
bill to reestablish the salmon marketing subcommittee, and
ASMI board had no objection to that amendment.
REPRESENTATIVE BILL HUDSON, sponsor of HB 275, said that
amendment 1 revised (copy on file) had been forwarded by
UFA. He said that the concept was in the Senate version of
the bill but had been removed when it was in the House. It
would establish the salmon marketing committee with
representation from around the coast to advise the ASMI
board. It would also delete the provision that establishes
the executive board which would still be up to the majority
of the board members who will now consist of 12 fishermen
and 12 processors. He said that he was in support of
amendment 1 revised.
SENATOR JUDITH SALO spoke in favor of amendment 1 revised.
She said that it would make the fishermen in her area much
more comfortable with the bill.
Senator Kelly questioned setting up the executive board.
Representative Hudson said that the amendment would
eliminate the executive board. Senator Kelly said that he
was satisfied with the amendment.
Senator Kerttula MOVED for adoption of amendment 1 revised.
No objections being heard, amendment 1 revised was ADOPTED.
Senator Jacko asked what part of the state would contribute
the majority of the tax money. Mr. Elton said that if it
was evaluated by region, Bristol Bay would contribute the
majority of the tax money.
In answer to Senator Kelly, Representative Hudson said he
had introduced separate legislation providing for a one
percent assessment change. He felt it was not appropriate
to include it in CSHB 275(FIN) because there had not been
adequate time to analyze this assessment.
Senator Jacko MOVED for adoption of amendment 2 (copy on
file). Co-chair Pearce OBJECTED for discussion purposes.
Senator Jacko explained that since the majority of the tax
revenue would be realized from the Bristol Bay area, there
was concern that this area was being asked to pay an
additional tax. This area already is forced to pay a good
amount of municipal and raw fish taxes. He explained that
his amendment would require that the ASMI board would be
comprised of 13 fishermen from the Bristol Bay, Alaska
Peninsula, Bering Sea, or Yukon-Kuskokwim region. One
member of the board would be a lay person selected by the
Governor. He felt that this would insure representation by
this area in the decision making process in regard to where
the tax money is spent. In answer to Co-chair Pearce,
Senator Jacko said the total number of board members would
remain at 25 but representation of the board members would
change.
Representative Hudson voiced his opposition to amending the
language of the bill and requiring all of the commercial
fishing members be from the Bristol Bay, Alaska Peninsula,
Bering Sea, or Yukon-Kuskokwim region. He said this would
mean there would be no fishermen from the balance of the
state of Alaska. Co-chair Pearce asked Senator Jacko's
intent of the amendment. Senator Jacko answered that since
50 percent of the tax money would be received from that area
that 50 percent of the board members should be from the
area.
Representative Hudson said that the purpose of CSHB 275(FIN)
was to provide broad representation throughout the maritime
regions of Alaska on the ASMI board to control not the only
the domestic marketing program but to control all other
aspects of the ASMI program. To only draw from this
specific area to represent the entire coast of Alaska would
be objectionable by fisherman in Cook Inlet, Prince William
Sound, southeast Alaska and other areas. Discussion
followed between Co-chair Pearce and Senator Jacko regarding
other members of the board. It was determined that this
amendment would say that all the fishermen on the board
would have to be from Bristol Bay, Alaska Peninsula, Bering
Sea, or Yukon-Kuskokwim region. Co-chair Pearce said that
she could understand objections to the amendment.
Recess 3:44pm
Reconvene 4:00pm
Co-chair Pearce announced that amendment 2 had been offered.
Senator Kelly OBJECTED to amendment 2. Representative
Hudson said that amendment 2 would break the bill's intent
of having an even-handed approach between the processors and
fishermen. The Governor makes these appointments and to
require all fishermen to come from one region in Alaska
would mean that the rest of the state would not be
represented. He said this amendment would destroy the
merits of this bill. Senator Kelly maintained his
OBJECTION.
JERRY MCCUNE, President, United Fisherman of Alaska, voiced
his opposition to having all 13 fishermen from the Bristol
Bay, Alaska Peninsula, Bering Sea, or Yukon-Kuskokwim region
and asked how the other fishermen from areas such as Copper
River and Kenai would be represented.
Co-chair Frank said that there should be fair representation
from all areas of Alaska. Senator Jacko said that the
experience of most of the fishermen was that UFA was not
that supportive of fishermen from southwestern Alaska. If
this legislation was passed, processors in 1993 would pay
$3.2 million and fishermen at 1% would pay $5 million. The
majority of the $5 million would come from the regions he
indicated in his amendment. Senator Jacko would support the
number of processors reduced on the board in order to make
room for other fishermen from other areas.
Mr. Elton said that over the last 15 years, ASMI has gone to
great lengths to not only include regional representation
but gear type representation as well to insure that large
processors and small operations were included in their
program. He said that this tax could vary from year to
year. ASMI is Alaska Seafood Marketing not just salmon
marketing. He said he understood Senator Jacko's concern
but a balance needed to be maintained for ASMI. He felt
assured that ASMI would listen to all the different
fishermen and regions regarding ASMI's marketing plans.
Mr. McCune said that he would be willing to work with
Senator Jacko regarding this amendment but he maintained his
opposition to having all the fishermen coming from one
region.
Representative Hudson suggested that the words "commercial
fishermen members shall be appointed proportional to the
amount of salmon taxes by region to the extent possible"
added to page 2, line 2. He said that this wording would
provide legislative intent to the Governor in his
appointment process giving consideration to those regions
that pay the highest taxes.
End SFC-93 #72, Side 2
Begin SFC-93 #74, Side 1
Senator Jacko said that he would consider amending his
amendment 2 to include one fisherman from another part of
Alaska.
SENATOR BERT SHARP asked if there was any other tax in
statutes that required fishermen other than the processors
to contribute a salmon tax. Mr. Elton said there had been
discussion about having 1 percent across the board on all
different types of fishing. Mr. Elton said there are some
groups that are in favor of that tax. The biggest problem
facing the seafood market is the salmon market. The
decision was made to see how this tax works in this bill and
then another tax could be added later for other fisheries.
Mr. Elton said that problems in the halibut and king crab
market were being faced but at this time salmon is the main
problem.
Representative Hudson said that ASMI markets its products
worldwide and millions of federal dollars have been used to
try and enhance the marketplace of Alaskan products. This
money can only be used for overseas marketing. Mr. Elton
said that $8.5 million of federal dollars were spent this
year, partially matched by the state. Representative Hudson
said that one part of salmon marketing that has been missing
for years is the fresh and frozen salmon. This present
challenge is to increase the consumption of Alaska salmon in
the domestic market. Alaska is not alone in its efforts to
look to the domestic market. Japan, Chile, the Norwegians,
New Zealanders, etc. are all looking at the U.S. domestic
market. If this legislation would pass, ASMI should be able
to bring the fishermen and processors together, moving them
into the domestic market with more knowledge. He wanted to
emphasize that the goal of increasing the domestic market
for all fishermen and processors must not be lost in side
issues. He asked the committee to consider the wording he
had suggested for amending the bill.
Recess 4:15pm
Reconvene 4:50pm
Co-chair Pearce announced that amendment 2 was still before
the committee. Senator Kelly maintained his objection. Co-
chair Pearce called for a show of hands and amendment 2
FAILED on a vote of 6 to 1. Co-chairs Pearce and Frank,
Senators Rieger, Sharp, Kerttula, and Kelly opposed the
amendment. Senator Jacko voted in support of amendment 2.
Senator Jacko MOVED for adoption of amendment 3 (copy on
file). Senator Kelly OBJECTED. Senator Kelly said he was
opposed to the word majority in the amendment. Co-chair
Frank said that this amendment would assure that there would
be proportional representation on the board. Senator Kelly
said that he was not sure that "majority" was proportional.
Co-chair Frank said that it was not the number of fishermen
but it should be proportionally based upon the value of the
product. Senator Kelly maintained his objection to
amendment 3. Co-chair Pearce called for a show of hands and
amendment 3 passed on a vote of 4 to 3. Co-chairs Frank and
Pearce, Senators Jacko, and Sharp voted in support of
amendment 3. Senators Kerttula, Rieger and Kelly were
opposed.
DEAN PADDOCK, Bristol Bay Driftnetters Association, spoke in
support of the original bill, HB 275. His association
believed that Alaska was in desperate need of a domestic
marketing program. He voiced his opposition to amendment 3
and would have preferred the wording as submitted by
Representative Hudson. He said that getting Alaskan
fishermen to work together was a difficult thing to
accomplish. He feared that amendment 3 would polarize the
fishermen and the processors. He reiterated that everyone
needed to work together. He said that after attending
meetings of the ASMI board and after contact with them, he
had never had any problems. He hoped that this legislation
would work for the good of all.
Senator Kerttula MOVED for passage of SCSCSHB 275(FIN) as
amended with individual recommendations and a fiscal note
for the Department of Commerce & Economic Development for
$5,640.3 and a fiscal note for Department of Revenue for
$109.7 with revenue of $5,750. Senator Jacko OBJECTED. Co-
chair Pearce called for show of hands and SCSCSHB 275(FIN)
as amended was REPORTED OUT of committee with the
accompanying fiscal notes on a vote of 4 to 3. Co-chairs
Frank and Pearce signed "do pass." Senators Sharp,
Kerttula, Rieger, Kelly, and Jacko signed "no
recommendation."
HOUSE JOINT RESOLUTION NO. 27:
Relating to an amendment to the Constitution of the
United States prohibiting desecration of the Flag of
the United States.
Co-chair Pearce announced that HJR 27 was before the
committee. She invited Bill Stoltze, staff for
Representative Ed Willis, to speak to the resolution.
BILL STOLTZE said that HJR 27 asked Congress to pass a
specific constitutional amendment prohibiting flag
desecrations and requests several other states to join in
this request. He said that 31 states had already submitted
requests but that it would take 38 states to pass the
amendment. He said that the American Legion and several
other veterans' organizations were in support of this
resolution.
Senator Kelly MOVED for passage of HJR 27 with individual
recommendations. No objections being heard, HJR 27 was
REPORTED OUT of committee with a zero fiscal note from the
House Judiciary Committee. Co-chair Frank and Senators
Sharp, Jacko, Kelly and Kerttula signed a "do pass." Co-
chair Pearce and Senator Rieger signed "no recommendation."
ADJOURNMENT
The meeting was adjourned at approximately 4:55 p.m.
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