Legislature(2005 - 2006)SENATE FINANCE 532

03/14/2005 09:30 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change --
Moved SB 63 Out of Committee
Heard & Held
Heard & Held
Dept of Administration
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                     SENATE FINANCE COMMITTEE                                                                                 
                          March 14, 2005                                                                                      
                             9:36 a.m.                                                                                        
CALL TO ORDER                                                                                                               
Co-Chair Wilken  convened the meeting  at approximately 9:36:39  AM.                                                          
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Fred Dyson                                                                                                              
Senator Bert Stedman                                                                                                            
Senator Donny Olson                                                                                                             
Also  Attending:  SENATOR  GARY STEVENS;  CHERYL  SUTTON,  Staff  to                                                          
Senator  Ben Stevens;  FRANK HOMAN,  Limited  Entry Commission;  JOE                                                            
CHILDERS, Executive  Director, Western  Gulf of Alaska Fishermen's'                                                             
Association,  and Vice President,  United Fisherman of Alaska;  ERIC                                                            
SWANSON, Director,  Division of Administrative Services,  Department                                                            
of Administration;  STAN  HERRERA, Director,  Enterprise  Technology                                                            
Services,  Department  of  Administration;  KIM  GARNERO,  Director,                                                            
Division of Finance, Department of Administration;                                                                              
Attending via Teleconference:  From Kodiak: DON ROBERTS                                                                       
SUMMARY INFORMATION                                                                                                         
SB  63-USE SEAT BELT ROAD SIGNS                                                                                                 
The Committee  heard from  the sponsor and  a member of the  public.                                                            
The bill was reported from Committee.                                                                                           
SB  93-FISHING PERMIT AND VESSEL LICENSE FEES                                                                                   
The  Committee heard  from  the sponsor,  the  Commercial  Fisheries                                                            
Limited Entry  Commission and an industry association.  The bill was                                                            
held in Committee.                                                                                                              
SB  46-APPROP: CAPITAL BUDGET                                                                                                   
The Committee  heard presentations on the appropriation  requests of                                                            
the Department  of Administration.  The bill was held in  Committee.                                                            
9:38:00 AM                                                                                                                    
     SENATE BILL NO. 63                                                                                                         
     "An Act  relating to road signs  encouraging the use  of safety                                                            
     CS FOR SENATE BILL NO. 63(TRA)                                                                                             
     "An Act  relating to road signs  encouraging the use  of safety                                                            
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Co-Chair  Wilken  stated  this  bill,  "Allows   the  Department  of                                                            
Transportation  [and Pubic  Facilities] to  erect and maintain  road                                                            
signs that  encourage the use of seat  belts at the site  of a fatal                                                            
motor vehicle accident."                                                                                                        
CHERYL  SUTTON, Staff  to Senator  Ben Stevens,  asserted that  this                                                            
bill "serves  great purpose".  She read  letter to  the editor  of a                                                            
newspaper from  Carol Kampen, the mother of a man  killed in a motor                                                            
vehicle accident who was not wearing a seatbelt, as follows.                                                                    
     It seems  there may be some confusion over Ben  Stevens' Senate                                                            
     Bill  63.  This  is legislation  allowing  the  erection  of  a                                                            
     roadside  memorial sign encouraging  the use of seat  belts. In                                                            
     the Daily  News article "Buckling up high on  legislators to-do                                                            
     list"  Feb. 9, it states  there are six  House members  who are                                                            
     opposed to  this legislation. A roadside memorial  sign program                                                            
     is already  available to the  public; you know the little  blue                                                            
     signs that say "Please  Don't Drink and Drive" or "Please Drive                                                            
     Safely"  and  under the  sign it  lists  the name  or names  of                                                            
     people  who  have  lost  their lives.  Why  would  they  oppose                                                            
     something  that really  isn't going to  cost anything  and will                                                            
     draw  attention to  the terrible  loss of life  due to  lack of                                                            
     wearing seat belts?                                                                                                        
     I lost  my youngest son, Nathan  Kampen, in a car accident.  He                                                            
     was  not wearing  his seat belt.  When I  requested a  memorial                                                            
     sign  saying "Please  Buckle Up"  or something  similar,  I was                                                            
     told  it was not available.  So I presented  by problem  to Ben                                                            
     Stevens, and he was  kind enough to help. I truly see no reason                                                            
     to oppose  this legislation.  I could always put up  one of the                                                            
     other  signs available,  but  my hope  is to  remind our  young                                                            
     people to "Buckle Up."                                                                                                     
Ms. Sutton added  her astonishment in learning that  over 50 percent                                                            
of  motor vehicle  related  fatalities  in  Alaska could  have  been                                                            
prevented if the individual had been wearing a seatbelt.                                                                        
Senator  Olson  noted  numerous  testimony  in  opposition  to  this                                                            
legislation and asked the reason.                                                                                               
Ms. Sutton  knew of no reason, and  surmised that the objection  was                                                            
to separate legislation  sponsored by Senator Bunde  relating to the                                                            
use of seatbelts.                                                                                                               
DON  ROBERTS  testified  via  teleconference  from  Kodiak  that  he                                                            
supported the  enforcement of laws  requiring seatbelt use.  However                                                            
governance  of road  signs  is an  administrative  function and  the                                                            
legislative  process  should not  be hampered  with  these types  of                                                            
Ms. Sutton  informed that Mrs. Kampen  attempted unsuccessfully  for                                                            
months address this matter  through the Department of Transportation                                                            
and Public Facilities  before she requested assistance  from Senator                                                            
B. Stevens. The Department does not oppose this bill.                                                                           
Co-Chair Wilken considering version "G"                                                                                         
Senator Dyson  offered a motion to  report SB 63, 24-LS0363\G,  from                                                            
Committee with  individual recommendations  and accompanying  fiscal                                                            
Without objection,  SB 63 MOVED from  Committee with fiscal  note #1                                                            
from the Department  of Transportation  and Public Facilities  in an                                                            
indeterminate amount.                                                                                                           
9:44:13 AM                                                                                                                    
     SENATE BILL NO. 93                                                                                                         
     "An Act relating to commercial fishing permit and vessel                                                                   
     license fees; and providing for an effective date."                                                                        
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair Wilken  stated this bill "increases the annual  license fee                                                            
for commercial  fishing vehicles based on the overall  length of the                                                            
boat. Commercial Fisheries  Entry Commission proposed regulatory fee                                                            
structure for limited entry  permits is estimated to increase annual                                                            
revenue by about $2.1 million."                                                                                                 
Co-Chair Wilken noted a new fiscal note dated 3/11/05 from the                                                                  
Department of Fish and Game.                                                                                                    
CHERYL SUTTON, Staff to Senator Ben Stevens, referenced handouts                                                                
[copies on file] and read testimony into the record as follows.                                                                 
AT EASE 9:46:11 AM/9:47:20 AM                                                                                               
     Senate  Bill  93  addresses  the  Commercial   Fisheries  Entry                                                            
     Commission.  The first  fact we  need to  understand about  the                                                            
     commission  is that  they are  totally fee-based  funded.  They                                                            
     receive no  general funds. From the charts in  your packets you                                                            
     can  see that the commission  has been  on a downward  trend in                                                            
     revenue and that revenues  and operational costs will soon meet                                                            
     and  revenues will  continue in  the downward  trend under  the                                                            
     current  fee structure. This  is in spite of the fact  that the                                                            
     commission  has greatly reduced  their work force. Some  of the                                                            
     contributing  factors  are  the Carlson  case,  the decline  in                                                            
     value  in certain fisheries,  and the consolidation  of various                                                            
     Senate  Bill 93 accomplishes  several  purposes. It will  bring                                                            
     the  state into compliance  with recent  rulings in Carlson  v.                                                          
     State  of Alaska. The Carlson  case was a class action  brought                                                          
     against  the state by  nonresident fishermen  who claimed  that                                                            
     the fee structure  was not lawful. The state had charged a 3 to                                                            
     1 fee differential  for nonresidents. The court agreed that the                                                            
     fees  could not  be established  in  this manner  and issued  a                                                            
     mandated  formula that  is now  calculated by  OMB. I have  the                                                            
     information   of  what  is  included  and  how   the  fees  are                                                            
     calculated  if the committee  members would like to  review it.                                                            
     The major component  contained in Senate Bill 93 is the removal                                                            
     of  the  $300  cap  for  annual  permit  renewal  currently  in                                                            
     statute.  This is an artificial cap because the  statute states                                                            
     that the base fee  must "reasonably reflect the different rates                                                            
     of economic  return for different  fisheries." The cap  results                                                            
     in fisheries  with a  very high economic  return being  charged                                                            
     fees  that are disproportionately  low.  This bill asks  you to                                                            
     remove   the  $300   cap  and  the   commission  will   develop                                                            
     regulations  for  the  categories  and fees  through  a  public                                                            
     hearing process.                                                                                                           
     The other  Carlson compliance element clarified  in the bill is                                                            
     to charge a nonresident  fee differential of $115 only one time                                                            
     regardless  of how many  permits a nonresident  is issued.  The                                                            
     court  said that the state could  only charge the differential                                                             
     once and  the commission has been complying with  this mandate.                                                            
     Another nonresident  element pertains to those  who qualify for                                                            
     a reduced,  or "poverty" fee. These individuals  would still be                                                            
     required to pay the full nonresident differential.                                                                         
     The  vessel license  fees  are also  addressed in  the bill.  A                                                            
     modest   modification   is  proposed.   The  6  vessel   length                                                            
     categories are maintained  and the fees are raised by $15, $30,                                                            
     $60, $75, and $90 respectively.                                                                                            
Ms. Sutton relayed that  the United Fishermen of Alaska organization                                                            
supports  this  legislation.   The  Commission  would   address  the                                                            
concerns  of those  who deem  the proposed  changes  as unfair.  She                                                            
exampled  that  the  fee increases  for  smaller  vessels  would  be                                                            
Senator  Olson  asked for  an  explanation  of chart  titled,  "CFEC                                                            
Revenue Received  Compared To Authorized Receipt Supported  Services                                                            
Budget." This  chart plots data for  the years FY 98 through  FY 10.                                                            
One line represents  Alaska State  Accounting System (AKSAS)  Actual                                                            
Revenue; another  line represents  Total Commercial Fisheries  Entry                                                            
Commission  (CFEC) Receipt Supported  Services Obligation  (includes                                                            
Lease, Fishermen's Fund  and Commercial Fisheries Division); and the                                                            
third line  represents CFEC  Receipt Supported  Services Budget  and                                                            
Fishermen's  Fund. He noted the revenue  would match the  obligation                                                            
amount then dip below a certain threshold.                                                                                      
Ms. Sutton informed  that the Commission is obligated  to contribute                                                            
a fee to  the Fishermen's  Fund, under the  Department of Labor  and                                                            
Workforce Development.  This fee is calculated at  39 percent of the                                                            
first $60, which is approximately  $24 for resident fisheries and 39                                                            
percent of  $175 for nonresident fisheries,  which is approximately                                                             
FRANK HOMAN,  Limited Entry Commission,  testified that as  recently                                                            
as 1998,  the difference  between  the obligations  and revenue  was                                                            
approximately  $2 million, with the  balance deposited to  the State                                                            
general fund.  By FY 08 the revenue would be $800,000  less than the                                                            
fiscal  obligations  and  increase  to over  $1  million  by FY  09.                                                            
Regardless  of the adoption  of this  bill and  the additional  $2.3                                                            
million generated  revenue, the downward  trend would continue.  The                                                            
amount of the deficit could not be calculated.                                                                                  
Mr. Homan stated  that in the year  2000 the legislature  authorized                                                            
the  Department of  Fish  and Game  to use  excess  revenues of  the                                                            
Commission for  fishery related projects. The authorization  amounts                                                            
have been higher  than the actual excess revenues  and therefore the                                                            
Department  has never  received  the  entire authorized  amount.  He                                                            
spoke to  the gap between  the total CFEC  obligation including  the                                                            
appropriation  to the Division of Commercial Fisheries  and the base                                                            
obligations  of the DFEC  of its  operating budget  and fees  to the                                                            
Fishermen's Fund.                                                                                                               
Mr. Homan pointed  out that Commission  estimates that by  the FY 06                                                            
the revenues would be less  than the total DFEC obligation including                                                            
the  appropriation  to the  Division  and the  approximate  $400,000                                                            
annual fee to the Fishermen's  Fund. The obligation includes a lease                                                            
payment for office rent.                                                                                                        
Co-Chair  Wilken  clarified  that  if this  legislation  passed  the                                                            
Commission would receive an additional $2.3 million in FY 06.                                                                   
Mr. Homan affirmed.                                                                                                             
Co-Chair Wilken  asked if the revenue  line should not reflect  this                                                            
increase to $5.7 million.                                                                                                       
Mr. Homan  agreed, but  cautioned  that if the  trend continued  the                                                            
revenue  amounts  and obligation  amounts  would converge  again  in                                                            
about six or seven years.                                                                                                       
Co-Chair Wilken clarified  this would occur if this legislation were                                                            
not adopted.                                                                                                                    
Mr. Homan responded that  without this legislation revenues would be                                                            
below obligations in FY 06.                                                                                                     
Co-Chair  Wilken   pointed  out  that  with  the  passage   of  this                                                            
legislation,  the Commission would  have a $2 million surplus  in FY                                                            
Mr.  Homan  affirmed   the  Commission  would  have   a  surplus  of                                                            
approximately $2 million  for the first couple years after this bill                                                            
was  implemented;  however, the  downward  trend would  resume.  The                                                            
proposed  elimination   of  the  fee  limitation  would   result  in                                                            
increased revenues.                                                                                                             
Co-Chair  Wilken  surmised  that  the  revenues  would  remain  $5.7                                                            
million and by  FY 15, the Commission would again  be in the current                                                            
situation with an impending deficit.                                                                                            
Co-Chair Wilken and Mr.  Homan continued deciphering the information                                                            
contained  on the  graph and  the projected  fiscal  impact of  this                                                            
Senator Stedman  requested additional  explanation of the  continual                                                            
bias of the downward  trend line in relation to the  apparent market                                                            
value of these adjustments.                                                                                                     
Mr. Homan replied  that a combination of factors cause  the downward                                                            
trend. The decision in  Carlson vs. State of Alaska is a significant                                                          
factor  because "the  three-to-one was  eliminated  as a fee."  This                                                            
legislation  would reduce  the $115 non-resident  differential  to a                                                            
one-time annual  fee with no regard to the number  of permits owned.                                                            
These  factors would  cause the  trend to continue  downward.  Other                                                            
factors  include consolidation  in  the fisheries,  particularly  in                                                            
halibut  and   black  cod.  That   would  continue  downward.   Also                                                            
consolidation  in the  fisheries  in halibut  and black  cod at  the                                                            
federal level  has resulted in the State selling fewer  permits. The                                                            
downward trend in salmon  permit values of the past several years is                                                            
another  factor because  the  fees are  based  on the  value of  the                                                            
permit.  Limitation  of fisheries  imposed  by  the State  has  also                                                            
contributed  to  the  downward  trend.   The  combination  of  these                                                            
factors has resulted in  significant decline in the last five years.                                                            
The Commission  hoped that fisheries  values would improve,  but the                                                            
trend line must be realistic.                                                                                                   
Ms. Sutton  opined that  the Senate  has benefited  from the  excess                                                            
revenues  of the  Commission  generated from  fees  assessed to  the                                                            
industry.  The Legislature  has often appropriated  these funds  for                                                            
projects in which general  funds were not otherwise available. Those                                                            
participating in the fishing  industry appreciate this. Continuation                                                            
of the  surplus  would be  beneficial.  The industry  is  improving;                                                            
particularly  the salmon industry,  and the situation could  change.                                                            
Senator Stedman  referenced the proposed  fee structure,  noting the                                                            
"40 basis points  off of the value of the permit"  and asked if this                                                            
is also  used for "the  final entry." He  asked if the calculations                                                             
remain the  same for the  proposed increase  from $300 to $1,500  or                                                            
almost $4,000.                                                                                                                  
Mr. Homan replied  that the two formulas utilized  include the four-                                                            
tenths of one percent of  the permit value in a limited fishery, and                                                            
four-tenths  of one percent  of the gross  earnings in an  unlimited                                                            
fishery.  The  fisheries Senator  Stedman  indicated  are  unlimited                                                            
Senator Stedman  understood this is a proposed schedule  and that if                                                            
this legislation  passes,  the Commission  would undertake  a public                                                            
process  to determine  the  actual fees.  Public  concerns would  be                                                            
addressed and considered at that time.                                                                                          
Mr. Homan  affirmed  the information  provided is  a proposal.  Upon                                                            
passage of  this legislation the Commission  would develop  a formal                                                            
proposal  and  hold  pubic  hearings.  The  Commission   is  already                                                            
communicating  with fishermen  about the fee  amounts. He noted  the                                                            
backup information  indicates  questions raised  with regard  to the                                                            
finfish category. The removal  of the existing maximum fee provision                                                            
would  result  in  increased  fees.  Fishermen  have  requested  the                                                            
Commission  consider adjusting  fees  to be based  on vessel  length                                                            
with lower fees for smaller boats.                                                                                              
SENATOR  GARY STEVENS understood  the fee-based  issue, the  Carlson                                                            
case and the removal of  the maximum fee provision. However he noted                                                            
the significant excess  revenue that would be generated in the first                                                            
few  years  after  the enactment  of  this  legislation,  thus  over                                                            
funding  the  Commission.  He  suggested  fees  could  be  increased                                                            
gradually in phases as needed, which would be more equitable.                                                                   
Mr. Homan responded  that the Commission has historically  generated                                                            
$2 to $3  million more  than the budgetary  needs. The Commission's                                                             
budget needs  are "fairly level".  The Legislature has appropriated                                                             
the additional  revenue to fund other  commercial fishery  projects.                                                            
This  option would  remain.  The Commission  is only  authorized  to                                                            
expend the amount appropriated by the Legislature.                                                                              
Ms.  Sutton  furthered  that  the  addition  of  the  lease  payment                                                            
obligation  could cause some difference  in the amount of  the total                                                            
Mr.  Homan  spoke  to the  increased  obligation  resulting  in  the                                                            
transfer  of the office lease  payment from  the Department  of Fish                                                            
and  Game  to  the  Commission.  The  Department  has  historically                                                             
included  the  lease  in  its  budget  utilizing  revenue  from  the                                                            
Commission. This year the component would be transferred.                                                                       
Senator  G. Stevens  opined  that the  Department  supports  funding                                                            
projects  from sources  other than  the general  fund. He  expressed                                                            
concern about overcharging industries.                                                                                          
Ms. Sutton  asserted that the industry  supports these projects  and                                                            
does not  oppose the fees.  The industry  intends the Commission  to                                                            
remain functional.  The Commission  would  maximize efforts  to work                                                            
with each fishing group  to address concerns and to make the fees as                                                            
reasonable as possible.                                                                                                         
Mr. Homan addressed  the suggestion to increase the  fees in phases.                                                            
This option  could be addressed in  the Commission's public  hearing                                                            
process.  This may  be more  functional than  requesting  additional                                                            
statutory action in the event the trend continues downward.                                                                     
Senator  Olson  asked  why  the  Department  does  not  address  the                                                            
underlying  problem  through  this  legislation  rather  than  delay                                                            
implementing a solution.                                                                                                        
Mr. Homan  responded  that the  "hope"  is that  the current  trends                                                            
developing  would "pull us  out of that".  He exampled the  positive                                                            
trends  in  the salmon  business  and  the  marketing.  Pricing  has                                                            
improved  for some  fisheries. Power  troll "is  looking good".  The                                                            
State  has embarked  on a  major marketing  effort.  These would  be                                                            
beneficial,  although increases would  not be realized before  FY 06                                                            
and the downward  trend that would  occur at that time. In  the long                                                            
term,  "it will  turn  around"  and much  of  the problem  would  be                                                            
Senator Olson  countered that the  witness was more optimistic  than                                                            
he  was, particularly  concerning  the  fisheries in  his  district.                                                            
Senator   Olson  predicted   that  a  significant   increase   would                                                            
exacerbate the situation,  as fishermen would become discouraged and                                                            
demoralized by the additional overhead expense.                                                                                 
Mr. Homan spoke to the  current fee structure and indicated that the                                                            
rates would  not increase significantly  for most salmon  fisheries.                                                            
Senator Stedman  noted the basis on permit value and  gross revenue,                                                            
pointing  out that gross  revenue fluctuates  every year and  permit                                                            
values change somewhat  as well. He asked if the fee structure would                                                            
be reviewed annually.                                                                                                           
Mr.  Homan  agreed  the  values  fluctuate  and  informed  that  the                                                            
Commission reevaluates the fees each year.                                                                                      
Senator Stedman  asked about the substantial number  of permits held                                                            
by  the  State  and asked  how  these  would  be  affected  by  this                                                            
Mr.  Homan replied  that  the  Division of  Investments  within  the                                                            
Department  of Commerce,  Community and  Economic Development  holds                                                            
the permits. The permits are not fished.                                                                                        
Senator  Stedman asked  if fees  are levied  against these  inactive                                                            
permits that are held as collateral.                                                                                            
Ms. Sutton  responded that the fees  are only charged when  a permit                                                            
is renewed.                                                                                                                     
Mr. Homan "suspected" the  number of permits in State possession was                                                            
not more than "a few dozen".                                                                                                    
Senator  Olson asked  how the  fees are  determined.  He noted  that                                                            
smaller  operators  would  pay the  majority  of the  increase.  The                                                            
proposed  fees for vessels  under 25  feet in length  would be  a 75                                                            
percent increase.  Vessels 25 to 50  feet in length would  have a 60                                                            
percent  increase.  However,   vessels  over  250  feet  would  have                                                            
increased  fees of  only  12 percent.  He asked  how  to respond  to                                                            
smaller vessel owners' complaints of being overcharged.                                                                         
Mr. Homan replied this  pertains to a "different category" of vessel                                                            
license, which are established  in statutes. The Commission has less                                                            
discretion with  these fees. The majority of the commercial  fishing                                                            
fleet  in Alaska  is  comprised  of smaller  vessels;  however,  the                                                            
proposed fee  increase is "fairly  modest" of $15 to $30.  There has                                                            
been  no fee increase  for  ten years.  The fee  structure could  be                                                            
changed to provide no increase  for the smaller vessels and a higher                                                            
increase for  larger vessels; however  26 vessels are in  the longer                                                            
length  category and  5,000 shorter-length  vessels.  Therefore  the                                                            
fees  for the  larger vessels  must  be increased  significantly  to                                                            
offset the  revenue that  would not be generated  from increases  of                                                            
fees for the smaller vessels.                                                                                                   
Ms. Sutton informed that  she is a commercial fisherman and that her                                                            
vessel is less  than 25 feet in length. She has no  objection to the                                                            
proposed increase.  She understands  the efforts of the Commission,                                                             
although  she   also  understood   Senator  Olson's  concerns.   She                                                            
interacts with  other fishermen frequently  and realized  the impact                                                            
of any increased expenses.                                                                                                      
Senator Olson remarked  that the fishermen operating in the election                                                            
district he represents  are "adamantly opposed" to this legislation.                                                            
He questioned  the testimony  regarding the  position of the  United                                                            
Fishermen of Alaska (UFA).                                                                                                      
Ms. Sutton replied  that the UFA endorsed this bill.  She was unsure                                                            
if any fishermen  from Senator Olson's  area are represented  on the                                                            
board of  UFA. She  offered to speak  to any  interested parties  on                                                            
this matter.                                                                                                                    
Senator Stedman  assumed that  the Division  of Investments  and the                                                            
Commercial  Fishing and Agricultural  Bank (CFAB) and other  lenders                                                            
held only a dozen permits  outside of the fishing marketplace due to                                                            
foreclosure. He  has been told that a substantial  number of permits                                                            
are  held  out of  the  marketplace  because  reissuing  them  would                                                            
suppress the  value of active permits.  He asked if a permit  is not                                                            
fished, whether the annual fee is still required.                                                                               
Mr. Homan replied  that only two organizations could  hold a permit:                                                            
the Division  of Investments  and  CFAB. He agreed  that because  of                                                            
difficult seasons in the  salmon fishing industry, the market had no                                                            
demand  for these  permits.  He did  not deem  the  number of  these                                                            
permits  to be significant.  Statute  provides that  any permit  not                                                            
paid for two  years would revert to  the State. Some permit  holders                                                            
do not pay  permit fees for  two years and  do not fish. However  if                                                            
the permit  holder decides to fish  the permit again, the  fees must                                                            
be paid.                                                                                                                        
Senator   Stedman  asked   if  the  fee   payments  are  then   paid                                                            
Mr. Homan affirmed.                                                                                                             
JOE   CHILDERS,  Executive   Director,   Western   Gulf  of   Alaska                                                            
Fishermen's  Association, and  Vice President,  United Fisherman  of                                                            
Alaska, testified that  the UFA did endorse this bill because it was                                                            
believed that the funding  must continue for fisheries management in                                                            
Alaska. Some funds are  transferred to other divisions. The UFA also                                                            
supported  efforts  of the  Division  of Commercial  Fisheries.  The                                                            
Commission  assured the UFA  that the proposed  fee increases  would                                                            
undergo an extensive administrative hearing process.                                                                            
Mr. Childers  next  spoke in  his capacity  of the  Western Gulf  of                                                            
Alaska  Fishermen's  Association.  The  members  of this  group  are                                                            
primarily  involved in  ground fish  fisheries,  but participate  in                                                            
many fisheries, including  squid, sardines and pea cod in Alaska and                                                            
the West Coast.  They include long-line, purse seine,  trawl and pot                                                            
fishing.  Approximately  80 percent  of the  fleet  is comprised  of                                                            
vessels  60 feet  in length  or less.  Many members  were  concerned                                                            
about  the  proposed fee  increase  for  the  miscellaneous  finfish                                                            
statewide category,  which includes  all trawl fishery vessels.  The                                                            
current fees  are based on the value  of the permit of the  fishery,                                                            
which is  a reflection  of possible  net profit.  The limited  entry                                                            
system has  changed the  fisheries from "input  control" to  "output                                                            
control  quota  share  programs."   He  exampled  a  member  of  the                                                            
Association  who  was  fully  vested   as  a long   line  fisherman,                                                            
maximizing  quotas for  several fisheries.  His  gross earnings  for                                                            
sablefish  and halibut fisheries  are likely  significantly  over $1                                                            
million  annually.   The  license  fees  for  these  fisheries   are                                                            
relatively  low;  however  the  proposed  fee  increases  for  trawl                                                            
fisheries would be almost  $4,000, although trawl fisheries generate                                                            
significantly less income.                                                                                                      
Mr. Childers  also relayed Association  concerns with fees  based on                                                            
vessel  length of more  or less  than 60 feet.  This delineation  is                                                            
irrelevant. Instead, horsepower  is a more significant factor in the                                                            
ability  to  increase income.  Many  vessels  participating  in  the                                                            
salmon fishery  are 58 feet in length with "tremendous"  horsepower,                                                            
and are  able to hold 168,000  pounds of fish.  This is compared  to                                                            
74-foot vessels  with less horsepower and able to  hold only 110,000                                                            
pounds of fish.  Therefore, fees imposed  based on vessel  length do                                                            
not reflect actual  earnings potential. As fisheries  "migrate away"                                                            
from  entry  permits  to  quota  share  systems,  taxing  output  of                                                            
fisheries must be considered.                                                                                                   
Mr.  Childers warned  that  the proposed  system  of  fees based  on                                                            
vessel  length  would  "lead  to  the  demise"   of  smaller  vessel                                                            
operators participating  in commercial fishing. This has occurred in                                                            
the Bering  Sea Pollock  fishery.  It is economically  efficient  to                                                            
maximize the use  of vessels and the licenses are  based on vessels.                                                            
This would result  in fewer vessels. The fees should  be modified to                                                            
tax quota shares instead.                                                                                                       
Mr.  Childers  stated that  UFA  and the  Association  support  this                                                            
legislation   because  they   expect  extensive   dialog  with   the                                                            
Senator Dyson  agreed with  the witness' comments.  He spoke  of the                                                            
history  in  Alaska  in  taking  arbitrary  actions  to  attempt  to                                                            
accomplish  social  and local  goals.  The  issue of  vessel  length                                                            
categorization  is an example  of unintended  consequences,  in that                                                            
vessels  have been  constructed  of poor  design, are  not safe  and                                                            
could  not be utilized  for other  fisheries.  The legislature  must                                                            
"get  out  of  the  business  of  designing  boats"  and  allow  the                                                            
marketplace and the fisherman flexibility needed.                                                                               
Senator  Olson asked  the  witness'  opinion of  the  demise of  the                                                            
smaller operators'  involvement in the industry. He  asked how could                                                            
the downward trend be reversed.                                                                                                 
Mr. Childers  recommended a system  of licensing or a fee  structure                                                            
based  on actual  output from  a fishery.  He has  been a  fisherman                                                            
since 1966  and currently salmon trolls  and has a halibut  quota in                                                            
Southeast.  This  qualifies   him  as a  smaller  vessel   operator,                                                            
although  he informed  he operated  large vessels  in the past.  The                                                            
penalty  to marginal  producers  is  high,  especially  if the  fees                                                            
increase. "If  you can't afford to fish, you certainly  can't afford                                                            
to pay  a fee  increase";  however  more lucrative  fisheries  could                                                            
absorb large increases of 500 percent.                                                                                          
Senator Olson  questioned  why the organizations  did not assist  in                                                            
proposing legislation  that could provide a realistic  and practical                                                            
solution rather than the current proposal.                                                                                      
Mr. Childers  replied that the Association  initially had  misgiving                                                            
about  this bill.  UFA endorsed  this bill because  they  determined                                                            
that a fee increase is  necessary for current and future operations.                                                            
Another approach to this  issue is necessary and he was hopeful that                                                            
the administrative hearing  process, as well as debate on this bill,                                                            
would result in solutions.                                                                                                      
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
10:42:40 AM                                                                                                                   
     SENATE BILL NO. 46                                                                                                         
     "An  Act making capital  appropriations  and appropriations  to                                                            
      capitalize funds; and providing for an effective date."                                                                   
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
The Committee heard presentations  on the Governor's capital funding                                                            
requests for the Department of Administration.                                                                                  
Department of Administration                                                                                                  
     State of Alaska Network Security Infrastructure Upgrades                                                                   
     $3,537,500 Info Svc fund                                                                                                   
     Reference No.: AMD40606                                                                                                    
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2005 - 06/30/2010                                                                           
     On January  18, 2005 the State of Alaska Wide  Area Network was                                                            
     the target  of a cyber attack which resulted  in the defacement                                                            
     of a web  server owned by the  Department of Health  and Social                                                            
     Services.  Upon further  investigation,  it was determined  the                                                            
     extent and scope of  the cyber attack was much larger than to a                                                            
     single  device.  In a  cooperative  effort with  SOA  agencies,                                                            
     approximately   110 servers   appeared  to have  experience[d]                                                             
     similar "signatures"  of this attack. The significance of these                                                            
     attacks  prompted  notification  to the MS.-ISAC  (multi  state                                                            
     information sharing and analysis center.)                                                                                  
ERIC  SWANSON,  Director,   Division  of  Administrative   Services,                                                            
Department   of  Administration,   testified  this  project   is  an                                                            
extension  of the $5 million  FY 04 supplemental  appropriation  for                                                            
security activities.                                                                                                            
STAN HERRERA,  Director, Enterprise Technology Services,  Department                                                            
of Administration  explained that a portion of these  funds would be                                                            
expended  to   assist  in  addressing   system  vulnerability.   The                                                            
remainder  of the funds would  be utilized  to complete the  project                                                            
undertaken  with the FY  04 supplemental  appropriation to  purchase                                                            
hardware and software in  response to the cyber attack identified by                                                            
a federal task force.                                                                                                           
10:46:24 AM                                                                                                                   
     Alaska Land Mobile Radio (ALMAR) Infrastructure Upgrades                                                                   
     $6,405,000 general funds                                                                                                   
     Reference No.: AMD40605                                                                                                    
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2005 - 06/30/2010                                                                           
     Funding in  the amount of $6.175 million is needed  in FY 05 to                                                            
     uphold  the State of Alaska's  obligation to the Department  of                                                            
     Defense  in a  joint  partnership for  the Alaska  Land  Mobile                                                            
     Radio (ALMR) Project.                                                                                                      
Mr. Swanson noted an upcoming  presentation to the Committee on this                                                            
10:47:07 AM                                                                                                                   
     Statewide  Administrative  System Replacement  Phase 1  - Human                                                            
     Resources and Payroll                                                                                                      
     $20,000,000 Debt Fin fund                                                                                                  
     Reference No.: 40081                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2005 - 06/30/2009                                                                           
     One-Time Project                                                                                                           
     The Department  of Administration is responsible  for operating                                                            
     statewide  payroll and  accounting systems.  These systems  are                                                            
     aging, and need to be replaced.                                                                                            
Mr. Swanson outlined this request.                                                                                              
KIM  GARNERO,   Director,   Division  of   Finance,  Department   of                                                            
Administration, read a statement into the record as follows.                                                                    
     When  I  came  to  this  job 6  years  ago,  I  recognized  the                                                            
     vulnerability  we have  with our existing  payroll system.   At                                                            
     that time there were  just over 100 licensed users of Tesseract                                                            
     software,  and now there  are less than  50.  The days  of this                                                            
     software   product's  viability  are  numbered,   and  that  is                                                            
     something  that impacts almost  all of state government.   This                                                            
     application   processes  payroll  for  the  court  system,  the                                                            
     legislature,  and the executive  branch, including most  of the                                                            
     corporations (all but University, RR, AHFC).                                                                               
     Replacing  the payroll system for an organization  as large and                                                            
     complex  as  the State  of Alaska  is  major undertaking.    We                                                            
     received  capital  appropriations to  begin the  process  in FY                                                            
     2003  and FY  2004.   We've spent  about half  of the  $900,000                                                            
     appropriated  to date, mostly  on this business case.  The work                                                            
     underlying this document  took about a year to complete and the                                                            
     scope  was  not  just payroll  and  human  resources,  but  all                                                            
     statewide administrative  systems.  We included accounting, and                                                            
     procurement,  and budget  functions and  involved the  business                                                            
     process  owners  for  each function.    The business  case  was                                                            
     completed  in  September  2003  and  it  is  available  on  the                                                            
     Division of Finance website.                                                                                               
     Reading  it,  you'll  find  our  administrative   systems  need                                                            
     serious overhaul.                                                                                                          
     ·  Our accounting  system is  20 years old,  written in  COBOL,                                                            
        and becoming more difficult to maintain.                                                                                
     ·  Our  human  resource   systems  are  a  mix  of   standalone                                                            
     · We have no statewide system for procurement whatsoever.                                                                  
      · And the systems we do have, don't talk together well.                                                                   
     Over  the next  several years,  we are  faced with  the job  of                                                            
     implementing current  technology to address these deficiencies.                                                            
      We  decided to  start  with the  payroll and  human  resources                                                            
     systems,  because  that is  where our  greatest risk  lies.   A                                                            
     necessary  related project  is a reporting  database that  will                                                            
     contain  information  from both  the  old and  new systems  for                                                            
     historic  and management needs.   The eventual goal  is for the                                                          
     reporting    database   to    include   data   from    multiple                                                            
     administrative  functions, which  would be a great improvement                                                             
     over our current reporting capabilities.                                                                                   
     Our plan  is to work through  the complicated task of  defining                                                            
     our requirements,  choosing the best solutions, and negotiating                                                            
     long-term contracts  that we can afford.  The actual nature and                                                            
     cost of the  solutions will not be known until  we work through                                                            
     the process,  and we can't work through the process  without an                                                            
     appropriation to fund it.                                                                                                  
Co-Chair  Wilken noted the  funding source  is "debt financing"  and                                                            
asked if this is a line of credit.                                                                                              
Ms. Garnero understood the same.                                                                                                
10:50:39 AM                                                                                                                   
     Public Building Facilities Projects                                                                                        
          $6,902,000 Bond Funds                                                                                                 
          $3,000,000 Public Bldg fund                                                                                           
     Reference No.: 39025                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2004 - 06/30/2005                                                                           
     On-Going Project                                                                                                           
     Funding is  necessary for continued maintenance  of state owned                                                            
     facilities that make  up the group know as Public Building Fund                                                            
     facilities.   These   facilities  include   the  State   Office                                                            
     Building,  the Alaska Office Building, the Community  Building,                                                            
     the  Douglas   Island  Building,   the  Atwood  Building,   the                                                            
     Fairbanks  Regional Office Building, the Court  Plaza Building,                                                            
     and the Dimond Court House.                                                                                                
Mr. Swanson reported  that priority deferred maintenance  needs have                                                            
been identified  for all the buildings.  He noted this list  changes                                                            
as boilers malfunction  or other emergency repairs become necessary.                                                            
Co-Chair  Wilken  asked  if  the  bond  funds  are  related  to  the                                                            
settlement  from the  case involving  Amerada  Hess Corporation  and                                                            
other oil producers.                                                                                                            
Mr. Swanson answered yes.                                                                                                       
Co-Chair  Wilken clarified  that  the public  building  fund is  the                                                            
account  paid  into by  agencies  occupying  space in  the  included                                                            
Mr. Swanson affirmed.                                                                                                           
10:52:31 AM                                                                                                                   
     Enterprise IT Projects                                                                                                     
     $3,706,000 Info Svc fund                                                                                                   
     Reference No.: 40437                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2005 - 06/30/2010                                                                           
     One-Time Project                                                                                                           
     This  category consists  of the 10  IT implementation  projects                                                            
     developed  with a contract with  Unisys Corporation,  and other                                                            
     enterprise projects requested by State agencies.                                                                           
Mr. Herrera told  of the IT projects and operations  constructed for                                                            
various  departments  that total  approximately  $260 million.  This                                                            
request would implement  systems that would increase efficiencies to                                                            
the  State   and   include  a   server  consolidation,   help   desk                                                            
consolidation, and asset management.                                                                                            
10:53:32 AM                                                                                                                   
     Data Center and Equipment Upgrades                                                                                         
     $3,297,000 Info Svc fund                                                                                                   
     Reference No.: 40435                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2005 - 06/30/2010                                                                           
     Phased - new                                                                                                               
     The purpose  of these projects  is to upgrade the outdated  PBX                                                            
     phone  systems; upgrade  the failing  environmental systems  in                                                            
     the data centers such  as air conditions, fire suppressant, and                                                            
     power  distribution; update the  Anchorage Data Center  to make                                                            
     it  "production  ready"  for  Anchorage  based hosting  and  to                                                            
     mirror  Juneau operationally  for 24x7 backup purposes;  and to                                                            
     replace  the IBM Mainframe  serve as it  is projected  to reach                                                            
     processing capacity in early FY06.                                                                                         
Mr. Swanson overviewed this item.                                                                                               
Mr.  Herrera   stated   this  request   is  for   funding  for   the                                                            
establishment of a disaster  recovery system. The State operates two                                                            
data centers, one located  in Juneau the other located in Anchorage.                                                            
Co-Chair  Wilken  asked  if Reference  No.  40437  is a  phased  new                                                            
revenue project.                                                                                                                
Mr. Herrera affirmed.                                                                                                           
10:54:48 AM                                                                                                                   
     Maintenance   Projects  for   Facilities  Outside  the   Public                                                            
     Building Fund                                                                                                              
     $3,098,000 Bond Funds                                                                                                      
     Reference No.: 39034                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2005 - 06/30/2007                                                                           
     On-Going Project                                                                                                           
     Funding is necessary for maintenance projects in facilities                                                                
     outside the public building fund.                                                                                          
Mr. Swanson gave  examples of facilities not included  in the Public                                                            
Building  Fund. A list of  priority projects  has been compiled  for                                                            
these facilities.                                                                                                               
Senator  Olson asked  why these buildings  are not  included  in the                                                            
Public Building Fund.                                                                                                           
Mr. Swanson  replied  that the  Public Building  Fund was  initially                                                            
established  as a pilot  project and included  eight buildings.  The                                                            
program  has been  successful  and considerations   are underway  to                                                            
include additional buildings.                                                                                                   
Senator Olson  asked if funds  would be more  readily available  for                                                            
these  projects  if  the facilities  were  included  in  the  Public                                                            
Building Fund.                                                                                                                  
Mr. Swanson responded  that the manner of funding  would change with                                                            
rent being charged  to the State agency occupants  of the buildings.                                                            
Some buildings, such as  the Governor's residence would be addressed                                                            
Senator Stedman  asked if the funding  for this item relates  to the                                                            
fund source referred to as Amerada Hess, as well.                                                                               
Mr. Swanson answered yes.                                                                                                       
10:56:57 AM                                                                                                                   
     State of Alaska Telecommunication System (SATS) Projects                                                                   
     $1,615,000 Info Svc fund                                                                                                   
     Reference No.: 40438                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2005 - 06/30/2010                                                                           
     One-Time Project                                                                                                           
     These  projects will provide  maintenance on the degraded  SATS                                                            
     infrastructure  which is  the backbone  of the state Wide  Area                                                            
     Network   (WAN)  and  the  Alaska  Land  Mobile   Radio  (ALMR)                                                            
     projects.  Also included is an  inventory of all equipment  per                                                            
     site   and   an  assessment   of   structural   integrity   and                                                            
Mr. Swanson overviewed this request.                                                                                            
Mr. Herrera  explained this  funding would  be utilized for  various                                                            
projects, including  purchasing battery  upgrades for 12  sites, and                                                            
SATS test equipment replacement  at approximately 128 sites. Some of                                                            
these  sites are  over 30  years old  and site  assessments must  be                                                            
completed  to  determine  necessary   upgrades.  The  project  would                                                            
determine  the users  of the systems  and reinstate  the  chargeback                                                            
method  that  was  eliminated  at  the  time  the  State  entered  a                                                            
contractual  agreement  with  a  telecommunications   company.  That                                                            
contract  has since  been terminated  and the  chargeback method  is                                                            
again necessary.                                                                                                                
10:58:40 AM                                                                                                                   
Mr. Swanson clarified  that the Governor's proposed  FY 06 operating                                                            
budget contains  a section that capitalizes  the funds proposed  for                                                            
these capital projects.                                                                                                         
10:59:09 AM                                                                                                                   
     License Plates, Tabs, and Manuals                                                                                          
     $385,000 Rcpt Svcs fund                                                                                                    
     Reference No.: 40440                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2005 - 06/30/2010                                                                           
     On-Going Project                                                                                                           
     Funding  will provide  for the purchase  of license plates  and                                                            
     tabs  to  maintain statewide  inventory  levels  necessary  for                                                            
     their required continued  issuance. The division is required by                                                            
     statute  (AS 28.10)  to issue  plates and tabs  and cannot  run                                                            
     out.  The funding also  provides for the  purchase of  the four                                                            
     different  driver manuals and law books that  must be available                                                            
     at all DMV offices.                                                                                                        
Mr. Swanson read the summary information.                                                                                       
10:59:45 AM                                                                                                                   
     DMV Take-a-Number System                                                                                                   
     $100,000 Rcpt Svcs fund                                                                                                    
     Reference No.: 40073                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2005 - 06/30/2007                                                                           
     Phased-new Project                                                                                                         
     Expansion of the take a number system used in the Anchorage                                                                
Mr.  Swanson explained  this  system  allows  customers  to "take  a                                                            
number" and  know the amount  of time before  they would be  served.                                                            
This also provides  a method to determine  the amount of  time taken                                                            
to provide services.                                                                                                            
11:00:56 AM                                                                                                                   
     AOGCC Leasehold Improvements                                                                                               
     $75,000 AOGCC Rcpt funds                                                                                                   
     Reference No.: 40072                                                                                                       
     Category: General Government                                                                                               
     Location: Anchorage Areawide                                                                                               
     Election District: Anchorage Areawide                                                                                      
     Estimated Project Dates: 07/01/2005 - 06/30/2007                                                                           
     One-Time Project                                                                                                           
     Funds will be used to purchase a space saving filing system                                                                
     and to purchase and install a ventilation system for the                                                                   
     confidential samples storage room.                                                                                         
Mr.  Swanson  explained  that  the  space  would  be  remodeled  and                                                            
reconfigured to  allow for the new filing system.  Also, because the                                                            
mineral samples  held in the office emit toxic odors,  a ventilation                                                            
system would be installed for the comfort of staff.                                                                             
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
Co-Chair Wilken adjourned the meeting at 11:02 AM                                                                               

Document Name Date/Time Subjects