Legislature(2005 - 2006)SENATE FINANCE 532
04/27/2005 09:00 AM FINANCE
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MINUTES SENATE FINANCE COMMITTEE April 27, 2005 9:06 a.m. CALL TO ORDER Co-Chair Green convened the meeting at approximately 9:06:27 AM. PRESENT Senator Lyda Green, Co-Chair Senator Gary Wilken, Co-Chair Senator Fred Dyson Senator Bert Stedman Senator Lyman Hoffman Senator Donny Olson Also Attending: SENATOR BEN STEVENS; HENRY WEBB, Staff to Representative Ralph Samuels; BEN MILLIGAN, Staff to Representative Bill Stoltze; JIM JORDAN, Executive Director, Alaska State Medical Association; RICK URION, Director, Division of Occupational Licensing, Department of Community and Economic Development; CHUCK HARLAMERT, Juneau Section Chief, Tax Division, Department of Revenue; PATRICK SHIER, Acting Deputy Director, Employment Security Tax, and Chief, Division of Employment Security, Department of Labor and Workforce Development of Employment Security, Department of Labor and Workforce Development Attending via Teleconference: From Anchorage: BOBBY FITHIAN, Representative, Alaska Professional Hunters Association; RICK THOMPSON, Resource Manager, Department of Natural Resources; GEORGE STEWART MD; From Kodiak: DONNA JONES; From Offnet Sites: GLEN CAROLL; JULIE BONNEY, Representative, Alaska Groundfish Data Association; LANCE NELSON, Assistant Attorney General, Department of Law; ED DERSHAM, Vice-Chairman, Alaska Board of Fisheries SUMMARY INFORMATION HB 76-BIG GAME SERVICES & COMM. SERVICES BD The Committee heard from the bill's sponsor, the Department of Natural Resources, and the industry. A committee substitute was adopted and the bill reported from Committee. HB 102-MEDICAL LICENSE: APPLICATION/FOREIGN GRAD The Committee heard from the bill's sponsor, the Alaska Medical Board, the Department of Commerce, Community and Economic Development, and took industry testimony. The bill reported from Committee. SB 113-GULF OF ALASKA GROUNDFISH FISHERY The Committee heard from the sponsor, the Department of Law, the Alaska Board of Fisheries, and took public testimony. The bill was held in Committee. SB 124-FISHERIES BUSINESS LICENSE; BOND The Committee heard from the Department of Revenue and the Department of Labor and Workforce Development. The bill reported from Committee. SB 153-INTERNATIONAL AIRPORTS REVENUE BONDS The bill was scheduled but not heard. CS FOR HOUSE BILL NO. 76(FIN) am "An Act relating to the Big Game Commercial Services Board and to the regulation of big game hunting services and transportation services; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. HENRY WEBB, Staff to Representative Ralph Samuels, the bill's sponsor, explained that this bill would re-establish a Big Game Commercial Services Board within the Division of Occupational Licensing, Department of Commerce, Community and Economic Development, to oversee the professional hunting and transporting industry. When the previous such Board terminated in the mid 1990s, its powers had been transferred to the Division. In the year 2003, both a Legislative Budget & Audit report, Audit Control Number 08- 30025-03, dated October 16, 2003 [copy on file] and a letter, dated March 18, 2003 [copy on file] from the Board of Game to Senate President Gene Therriault and House Speaker Pete Kott, pointed out many of the problems facing the industry. The Audit suggested that the Legislature re-establish the Board. While a similar bill had passed the Senate the previous Legislative Session, it had not progressed through the committee process of the House of Representatives. "Extensive work" has been conducted on this bill, which balances the concerns of the industry, the public, and the agencies that manage the resources. The majority of this 29-page bill relates to transferring the authority from the Division to the Board. 9:09:13 AM Mr. Webb stated that the differences in the bill before the Committee and the bill that passed the Senate the previous year would include increasing the membership of the Board from seven to nine members; requiring that the Board issue a license to someone who satisfied license requirements, and increasing the level of a fine that would have precluded an individual from being able to receive or renew a guide or transfer license for a violation of a hunting, guiding, or transporting statute or regulation that had been received in the previous twelve month period from $1,000 to$2,000. Co-Chair Wilken moved to adopt the committee substitute Version 24- LS0332\Y as the working document. There being no objection, the Version "Y" committee substitute was ADOPTED as the working document. Mr. Webb noted that one of the three differences between CS HB 76(FIN) am, Version 24-LS0332\F.A and the Version "Y" committee substitute is the elimination of the requirement that the Board must award a license at their next meeting. This change, which was suggested by the Division of Occupational Licensing, would provide some flexibility to the Board and the Department of Commerce, Community and Economic Development. 9:12:01 AM Co-Chair Green understood therefore that the phrase "first meeting of the Board" had been eliminated from language in Version "Y", Sec. 4((a)(2) beginning on line four, page three, which reads as follows. (2) authorize the issuance of [ISSUE] registered guide- outfitter [GUIDE], class-A assistant guide, assistant guide, and transporter licenses after the applicant for the license satisfies the requirements of the license; New Text Underlined [DELETED TEXT BRACKETED] Mr. Webb affirmed. Mr. Webb continued that the second change that would be implemented by the Version "Y" committee substitute would be the inclusion of the phrase "an unsuspended fine" in Sec. 6(a)(1)(ii), (iii), and (iv), lines 23, 25, and 27 respectfully. This language was included at the suggestion of the Department of Public Safety. 9:12:39 AM Co-Chair Green asked whether the levels of the fines specified in those sections were new. Mr. Webb stated that the fine levels were included in the previous version of the bill, Version "F.A". Co-Chair Green clarified therefore that the inclusion of the term "unsuspended fine" was the issue at hand. Mr. Webb concurred. Mr. Webb stated that the third change included in Version "Y" was the expansion of some of the criteria that must be included in guide and transport contracts. The new language is included in Sec. 17(c) beginning on line 26, page 11 of the bill; specifically the language reflected on lines six through 19 on page 12. Mr. Webb stated that this criterion was not exclusive; the Board could develop additional criteria "as they deemed appropriate". 9:13:41 AM Co-Chair Green recalled that a vast amount of time had been spent discussing this legislation the previous year. To that point, she asked for confirmation that other than the language identified today, the remainder of the language mirrored that of the previous Session's bill. Mr. Webb affirmed. Senator Dyson asked permission to abstain from voting on the bill due to a conflict of interest. The bill would affect his business. Co-Chair Green overruled the request. Senator Dyson noted that while the bill might "make his life a little more miserable", he would probably vote in favor of it. 9:14:50 AM BOBBY FITHIAN, Representative, Alaska Professional Hunters Association, testified via teleconference from Anchorage and stated that this bill "is supported by every State, federal, or private entity that has any stewardship" involving such things as wildlife or wildlife resources. It would enhance "proper stewardship, accountability, and sustainability" to one of the State's "oldest and most recognized industries". A tremendous amount of discussion has transpired in regards to this issue, and he appreciated the Committee's attention to the bill. RICK THOMPSON, Resource Manager, Department of Natural Resources, testified via teleconference from Anchorage, to notify the Committee of the Department's support of the bill. Co-Chair Wilken moved to report the committee substitute from Committee with individual recommendations and accompanying fiscal notes. There being no objections, SCS CS HB 76 (FIN) was REPORTED from Committee with zero Fiscal Note #1, dated February 4, 2005 from the Department of Fish and Game, zero Fiscal Note #2, dated February 4, 2005 from the Department of Public Safety, zero Fiscal Note #4, dated February 11, 2005 from the Department of Natural Resources, and $20,000 Fiscal Note #5, dated February 11, 2005 from the Department of Commerce, Community and Economic Development. 9:18:02 AM AT EASE: 9:18:08 AM / 9:18:30 AM HOUSE BILL NO. 102 am "An Act relating to the licensure of foreign medical graduates and to applications for a license to practice medicine; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. BEN MILLIGAN, Staff to Representative Bill Stoltze, the bill's sponsor, explained that this bill is an effort to address the shortage of doctors in the State as measured on a per capita basis, particularly in specialty fields. "In order to curb this shortage, it is important to recognize foreign medical school graduates." The current requirement is that doctors must complete a residency program in the United States (U.S.). This legislation would provide the Alaska State Medical Board the discretion to establish proof of competency and professional qualifications requirement in order to allow foreign medical school graduates to practice medicine in the State. Co-Chair Green noted that Members' packets include a one-page bill summary letter [copy on file] dated January 25, 2005 from the Alaska State Medical Association and addressed to Representative Stoltze. 9:20:00 AM Senator Olson spoke in "strong favor" of the bill. He shared that during his membership on the State Medical Board, this issue was a continuing "snag", as many "very good" foreign medical school graduates were unable to practice in the State. Co-Chair Wilken asked how Alaska compares to other states in this regard. 9:20:48 AM Mr. Milligan deferred to a forthcoming testifier, Jim Jordan, as he would be more qualified to address that question. GEORGE STEWART, MD, testified via teleconference from an offnet site to attest to the shortage of doctors in the State, specifically in specialty areas such as pulmonary critical care medicine in which he practices. While, ideally, there should be ten such practitioners, there are currently only eight and two of them, himself included, are 68 years old. This legislation would not "dumb down" acceptance for medical licensure in the State. Dr. Stewart cited two examples of very qualified foreign trained medical doctors who could not practice in the State due to their not meeting the State's U.S. training program requirement. This legislation would have allowed the Medical Board to review these doctors' qualifications and allowed the issuance of licenses to these doctors. The Board was disappointed that the current interpretation to existing requirements disallowed such action. In response to Co-Chair Wilken's question as to how Alaska's requirements compared to other states, he noted that most other states require 24-months of U.S. training. Alaska requires three years of training. 9:24:53 AM Co-Chair Green pointed out that a letter [copy on file] dated April 7, 2005, from Dr. Stewart and addressed to herself and Co-Chair Wilken included the examples presented by Dr. Stewart. JIM JORDAN, Executive Director, Alaska State Medical Association, noted that the aforementioned letter from the Association is indicative of the Association's support of the bill. He urged the committee to adopt the legislation as it would provide the Medical Board "the needed flexibility" that is required in regards to the qualification of foreign graduates. 9:25:48 AM Mr. Jordan added that a March third issue of the USA Today newspaper [copy not provided] cautioned that by the year 2020, the nation would experience a shortage of between 85,000 and 200,000 physicians. The State must be able to attract quality, well-trained physicians, including those who might not have been trained in the U.S. Mr. Jordan stated that some "very positive unintended consequences" could occur were this legislation adopted. Eighty different languages have been reportedly spoken in the Municipality of Anchorage school district. "That is reflective of the diverse ethnicity of our population." It is "very critical" when administering medical care "that the care that is provided be culturally competent". This bill would be an opportunity for some foreign nationals to provide such culturally competent care. They would also serve as teachers for the physicians in the community. 9:27:56 AM Co-Chair Wilken asked Mr. Jordan how the State's requirements compare with other states. 9:28:20 AM Mr. Jordan understood that numerous other states require fewer years of graduate level training programs. In addition, other states' medical boards are allowed "the latitude to adopt by regulation different standards that would provide for competency" of foreign trained medical doctors. Mr. Jordan noted that competency considerations could include licensure in another state for a period of time; English competency; specialty certifications or passage of a U.S. core clinical competency examination. "The key is to provide the discretion to the State Medical Board to adopt by regulation the standards" that would assure that the State has competent physicians. 9:29:38 AM Senator Olson questioned the reason that "such a good bill" had not been introduced before. 9:29:58 AM Mr. Jordan responded that, the fact that medical doctors such as Dr. Stewart, have stepped forward and provided "specific hard core examples" of need have furthered the cause. 9:30:30 AM RICK URION, Director, Division of Occupational Licensing, Department of Community and Economic Development testified in strong support of the bill. He acknowledged the comments of the testifiers and stated that providing the Board the needed discretion would be "a step in the right direction". "This is a good fix." 9:31:27 AM Co-Chair Wilken moved to report the bill from Committee with individual recommendations and accompanying fiscal note. There being no objection, HB 102am was REPORTED from Committee with zero Fiscal Note #1 dated February 2, 2005 from the Department of Commerce, Community and Economic Development. 9:32:04 AM CS FOR SENATE BILL NO. 113(RES) "An Act relating to entry into and management of Gulf of Alaska groundfish fisheries." This was the first hearing for this bill in the Senate Finance Committee. SENATOR BEN STEVENS, the bill's sponsor "by Request of the Managers", stated that this bill "is a process piece of legislation" that would authorize the Alaska Board of Fisheries (the Board) and the Alaska Commercial Fisheries Entry Commission (the Commission) "to develop a new fisheries management regime called the direct access privilege program" pertaining to the development of groundfish fisheries in the Gulf of Alaska. Co-Chair Green asked that the term "managers" be further explained. Senator B. Stevens communicated that the term managers includes a combination of representative from the Department of Fish and Game, the Alaska Board of Fisheries, the Alaska Commercial Fisheries Limited Entry Commission, and the North Pacific Fisheries Management Council. This legislation is the outcome of a two-year process conducted by the Gulf of Alaska Groundfish Rationalization Management Team, which includes representatives from the four aforementioned entities. The purpose of this endeavor was to align the State's fisheries resource management with the federal fisheries management plans that are being developed and implemented for the federal fisheries outside of the State's three-mile from shore oversight limit. Senator B. Stevens stated that the bill would provide the Department of Fish and Game (the Department) and the Commission to explore and develop a plan to limit access privileges to harvest fish within the State's three-mile "zone". Senator B. Stevens referred the Committee to the April 2005 Memorandum of Understanding (MOU) [copy on file] between the Board and the Commission which details the process through which those entities would conduct public hearings to evaluate the criteria for participation in the Gulf of Alaska Groundfish Fisheries direct access privilege program (the Program). 9:34:49 AM Senator B. Stevens avowed that anything affecting fisheries would be a "controversial" issue in this State; this legislation would be no exception. One of the primary issues is the fact that the legislation would "allow the managers to explore the development of a new system". People become afraid and leery, and resist any change to the existing system: these are the reasons behind "the controversy and the passion and the objection" to advancing this plan. Senator B. Stevens shared, as a personal note, that he has been personally criticized due to his father's (United States Senator Ted Stevens) involvement in federal fisheries management plans. "The same people that are criticizing the federal management plan are again criticizing me at this level of implementation." It is "a sad fact" that the criticism could not be targeted towards the plan or the implementation or development rather than being personal criticisms. Nonetheless, the proposed process "would explore new ways of managing fisheries into the future" while continuing to protect the biomass and seek new efficiencies in the fisheries. Efforts to protect the "historical participants" and to determine how to allow new entries into the fishery would be sought within the constraints of maintaining an economic fishery. Senator B. Stevens noted that numerous individuals, both those who support and oppose the plan, would be presenting testimony. 9:37:51 AM Co-Chair Green asked that the legislation be explained in layman terms, specifically what it would attempt to do and why someone might support or disapprove of the effort being proposed. 9:38:06 AM Senator B. Stevens explained that the bill would address how the State's fisheries management policies could best align with the management of the fisheries outside of the State's three-mile coastal water management zone boundary. The Alaska Department of Fish and Game and the Commission manage the fisheries inside of the three-mile boundary and the North Pacific Fisheries Management Council manages the fisheries conducted outside of that three-mile boundary. Senator B. Stevens continued that a federal Rationalization of the Fisheries effort would be implemented this year to fisheries outside of the three-mile boundary. This bill "would allow the inside of the three-mile fisheries managers to develop a plan to react to what's going on outside" of that zone. "The ultimate goal … of this bill is to protect the State water fishermen" from the activities conducted outside of the three-mile zone. There is "an invisible barrier" there: "the fishermen from inside can't go outside, but there's nothing to prevent the outside fishermen from coming inside." 9:39:49 AM Co-Chair Green asked whether the change might create a worse scenario than that incurred by maintaining the status quo. Senator B. Stevens responded that many individuals support continuance of the status quo. "The question is whether the status quo would make us better off or worse off." It is both his and the managers opinion that the State would fare worse by continuing the status quo. Co-Chair Green understood that those supporting this proposal base their position on the fact that the fisheries outside of the three- mile limit would change while the fishery inside of the three-mile limit would remain the same and thus could not react to changes occurring in the outside waters. Senator B. Stevens affirmed. "The theory is … that there would be an invasion or an influx of those outside fishermen coming in and harvesting the fish inside and then going out to the outside." Co-Chair Green understood therefore that this legislation would serve "to neutralize" that activity. Senator B. Stevens responded that this legislation would "attempt" to do that". 9:40:48 AM Senator Stedman asked for information regarding the public process that has occurred on the bill, specifically whether this would be "the end or basically the beginning" of that process. Senator B. Stevens characterized this legislation as being neither of those; "this is a step in the evolution of it". The Gulf of Alaska Ground Fish Rationalization Management Team has been discussing this issue for approximately three years and more than nine public meetings have been held. Those activities have "evolved into this legislation". This bill "has evolved" from a similar bill that was introduced but did not advance the previous Legislation Session, even though "extensive public hearings" had occurred. 9:42:20 AM Senator B. Stevens stated that the aforementioned "MOU outlines the public hearing process that would be" conducted before the direct access privilege criteria is developed. "In a step one through ten" process, this could be regarded as step one-and-a-half or two. A long process would be anticipated. 9:43:00 AM Co-Chair Green asked whether testimony from those opposing the legislation would be forthcoming. Senator B. Stevens affirmed. Senator Hoffman understood that the legislation would be limited to the Gulf of Alaska fishery; specifically that the Bering Sea fishery would not be addressed. 9:43:24 AM Senator B. Stevens affirmed that the legislation would be limited to the Gulf of Alaska groundfish fishery. "The underlying piece" to this legislation is that it would allow the Board and the Commission "to develop a plan, but only at the request of the participants in that fishery. It would not develop a plan and then impose it on the fishery." Were the fishermen "to come forward with a proposal or request to be included" then the Managers would develop a plan and the criteria. That sequence of events "is probably the most misunderstood piece of this legislation". Senator Hoffman referenced the "excusive harvest shares to persons" language in Section 1(a)(7), page two, line 14, and the "access limitation for the dedicated access privilege program" language in Section 1(b) page two, line 21, and voiced concern about how an individual could become a participant in the fishery, as, were the program a success, it might be expanded to the Bering Sea fishery. 9:45:50 AM Senator B. Stevens expressed that the language in "Section 1 is Legislative findings and intent". "The actual heart and soul of the" bill is included in Sec. 2(c) on page three, lines seven through 20. Senator Hoffman acknowledged that the heart and soul of the program is the dedicated access privilege concept. The question is how would people who grow up in the State be granted access to the program. Co-Chair Green asked whether the concern is to whether the program might be extended to the Bering Sea fishery. Senator Hoffman responded that were the program successful, it might expand to the Bering Sea; however, the question is in regards to the process that would allow new participants in the program. Senator B. Stevens recognized Senator Hoffman's question as addressing a valid concern. The only fisheries that would be included in the program would be those that requested inclusion: those would be the fisheries which require significant capital investment and are experiencing "extensive competition and pressure…" such as the Gulf of Alaska Pollack trawl fishery and the rockfish and flatfish industries. Entry-level fisheries would continue to be available even were this program implemented. Senator B. Stevens voiced that it is understood that not all fishermen begin their fishing career in the offshore trawl industry. To that point, he identified the mechanical jig fishery, which is the largest fishery in the Gulf of Alaska, as being excluded from the legislation. He noted however, that, at some point in the future, that fishery could be included were those fishermen to request such action. Both the entry-level fisheries and the mechanical jig fishery, which is "the most controversial gear type", are opposed to this legislation. 9:48:36 AM Senator B. Stevens stated that both his and the Managers' position is that if "those who participate in fisheries across the State and in the Gulf of Alaska want to have the fisheries managers explore new ways to manage their fish to make it more economic, safer, higher value products, then" they should be provided "the right to explore the development of a new management regime. If they don't want it, then they don't have to have it imposed on their fishery." Senator B. Stevens quoted a [unspecified] harvester from Homer who labeled the legislation as "a tool that we are allowing the managers to create and then implement once the participants agree to it through the public process" detailed in the MOU. 9:49:40 AM Co-Chair Wilken understood that the Alaska Department of Fish and Game, the Commission, and the Board manage the fisheries area within three miles of shore, and that the North Pacific Fisheries Management Council manages the fisheries outside of that three-mile zone. Senator B. Stevens affirmed. Co-Chair Wilken asked for clarification as to which of those two areas the dedicated access privileges would apply. Senator B. Stevens stated that those privileges would apply to the inside three-mile from shore zone. Co-Chair Wilken asked to whom the privileges would be granted. 9:50:37 AM Senator B. Stevens clarified that, depending on their history; a person could be a participant in the federal fishery, the State fishery, or both. While a fisherman might be limited in regards to what area they could fish, the fish biomass moves in and out of each zone and an agreement between the Department and the Council allows the fish to be caught on either side. This legislation is specific to the fish caught in the three-mile from shore zone. Co-Chair Wilken understood that the privilege "would be granted by the group" fishing the three-mile zone. Senator B. Stevens clarified that the privilege "would be granted to the group" inside the three-mile limit. Co-Chair Wilken ascertained, therefore, that the Managers would grant the privilege. Senator B. Stevens affirmed. Co-Chair Wilken theorized that a fisherman fishing outside of the three-mile zone could apply for a dedicated access privilege to fish within the three-mile zone. Senator B. Stevens stated that that was correct, provided the applicant met the qualifications that would be developed through the process allowed by this legislation. This process is outlined in Sec. 5 page four of the bill. Co-Chair Wilken understood therefore that this legislation would provide a method to "manage those that are outside that want to come into the three-mile zone". Senator B. Stevens affirmed. In addition, it would also "manage the ones inside to protect them from the outside". 9:52:21 AM Co-Chair Wilken asked whether the dedicated access privilege would have value in that it could be sold. Senator B. Stevens stressed that that issue, "is one of the big challenges in this program", as the State's Constitution prohibits the State from allocating the resource. To that point, "this is the right to harvest the resource; it's a privilege not a perpetuity". Senator B. Stevens shared that some of the criteria that would be developed would address how often the privilege must be renewed, the circumstances through which transfers of the privilege might occur, or whether the privilege would be reassumed into a pool to be redistributed to future participants. These are things that the Board and the Commission must develop in the plan. This is "the root of the opposition" to the bill; "we are giving them the right to develop a plan but we don't know what the outcome of the plan" might be. The question is "how do we know the outcome of the plan until we give them the authority to develop it". Co-Chair Wilken asked whether the dedicated access privilege would be awarded to a fishery group or to a boat. Senator B. Stevens stated that under the current version of the bill, anyone with "historical participation would be eligible for consideration". This would not pertain to a processor. 9:53:41 AM Senator B. Stevens stated that the federal approach to determining one's future participation level is a percentage based on the years of participation and the percent of those years' quota that was caught. The State of Alaska would "face different challenges" in this regard as the State is prohibited from allocating that right; the State's approach must be to grant the privilege to participate in that fishery. Co-Chair Wilken asked for clarification regarding whether the "they" being referred to is a boat. Senator B. Stevens stated that the privilege to participate could be granted to a boat or to an individual. The conditions of the bill would allow the term "they" to include anybody who is currently participating. Senator Hoffman concluded that this would include vessel owners. Senator B. Stevens stated it could include vessel owners, the boat, or the individual. The provisions in the bill would allow the managers to develop "the criteria to quantify" who would be eligible. Co-Chair Wilken surmised, therefore that "they who are eligible, will possess a dedicated access privilege at some time". Senator B. Stevens affirmed. Co-Chair Wilken asked whether that privilege could be sold. Senator B. Stevens responded that that is one of the issues that would be determined. That is why the renewal option would be available. He reiterated that the privilege could not be given to them, as the State is prohibited from allocating its resources. Co-Chair Wilken thanked the sponsor for the clarifications. Senator Olson asked whether this legislation would have any affect of the Individual Fishing Quotas (IFQs), since the State's Constitution prohibits the allocation of specific resources. Senator B. Stevens replied in the negative, as the IFQ program is specific to the halibut and sablefish fisheries, both of which are managed by the federal fisheries management plan. There is a separate fisheries management program in effect for the groundfish fishery, which includes Pollock, codfish, and flatfish. Senator Hoffman noted that it could be very costly to participate in many of the fisheries. To that point, he asked whether an individual's financial interest in a vessel would qualify the person for the dedicated access privilege. Senator B. Stevens stated that this issue would be addressed by the criteria specified in Sec. 5(a)(b)(c), page four and specifically Sec. 5(d) on page five of the bill. The Managers must address each of the concerns listed in Sec. 5(d) while they develop an individual plan for implementation for each fishery. Different management plans are currently developed now for each region of the State. 9:58:30 AM Senator Hoffman determined therefore that it would be up to the Board to develop the plan. Senator B. Stevens affirmed, and stated, that, more importantly, the outcome would be determined by the industry working in conjunction with the Board. He reiterated that the industry must request the implementation and the development of the plan for their fishery. Were a fishery to not desire the plan, it would not be developed or implemented. Senator Hoffman commented that the bill contains language specifying that the program must be "in the best interest of Alaska and Alaskans". Senator B. Stevens avowed that that is the purpose of the proposal. 9:59:15 AM Senator Stedman reviewed historical events in which the United States assumed control of fishing grounds within 200 miles of its coastline. Russian and Korean fishermen had previously fished those grounds. Following the U.S. control of those grounds, the federal IFQ program was implemented. Continuing, he asked whether this situation could have evolved as an effort "to improve upon the past restrictive entry systems". 10:00:10 AM Senator B. Stevens characterized the comments "as a fair analysis". The 200-mile limit was established by the Madison Act of 1976. The management conducted by the North Pacific Management Council was once referred to as the Total Allowable Fishing for Foreign Fleets (TAFFF). "All these fisheries" were included in that allocation. This evolved into a Joint Venture Fishing in which U.S. harvesters caught the fish and sold and transferred them at sea to a foreign factory ship. The next program was the Total Allowable Catch for American Fishing Fleets (TACAFF), which evolved to include the U.S. owned foreign factory ship and then the shore-based investments for groundfish fisheries in the Bering Sea and Kodiak. "Now there is pressure in capitalization, for all the fish can be harvested by U.S. fleets and not only that", there is competition between Alaska fleets and other U.S. vessels. Senator B. Stevens stated that this legislation is, as suggested by Senator Stedman, "another evolution of an attempt to say we want the fish harvested" within three-mile limit to be caught by Alaska- based fisherman, and managed by the Department of Fish and Game. "There is competition at every level now. It's just an evolution of efficiency" and processing capacity and demand for the State's products. Senator Hoffman opined therefore that, as the fisheries beyond the three-mile limit were Americanized; this legislation could be characterized as an attempt to Alaskanize fisheries within three- mile limit. Senator B. Stevens characterized the legislation "as an attempt to protect the Alaskan participants". There is an invisible barrier three miles offshore: the federal side has limited license participants and a quota system. The joint federal/State management regime has specified that a certain amount of fish could be caught inside the three-mile zone and a certain amount of fish could be caught outside that zone. Those who participate in the three-mile limit fishery are not permitted to participate in the fisheries outside of that zone. However, there is nothing in law that would prevent those who fish outside the three-mile limit from fishing inside the three-mile limit. The State currently has open participation. Those who can fish outside the three-mile limit, fish inside the three mile limit first and then fish outside the zone and harvest their fish. Alaskan fishermen are not permitted to participate outside that three-mile zone. Senator B. Stevens concluded therefore, that this legislation is an attempt to say that those who fish outside could not come inside the three-mile limit and harvest the fish in those waters first. This act shortens the season and eliminates the ability for our shore-based fishermen to earn a living. 10:04:08 AM Co-Chair Green understood therefore that "that is the ultimate risk": Fishery openings could become shorter and shorter. Senator B. Stevens affirmed that fishery openings get shorter and shorter each year. He disclosed that the mechanical jig fishery once opened in March and closed in October. Then it was shortened to March to June, and currently it is March to April. Co-Chair Green surmised that openings could be as short as a month. Senator B. Stevens informed that the duration of some fisheries is less than 12 hours. 10:05:00 AM Co-Chair Wilken asked for an explanation of the mechanical jig machine fishery and why that fishery was excluded. 10:05:17 AM Senator B. Stevens expressed that that fishery is "a controversial topic. A mechanical jig fishing machine is a machine that's set on the side of a smaller vessel that", either through the use of electronics or hydraulics, "jigs and as soon as there's pressure on the jig, it automatically winds the fish up". Co-Chair Wilken asked for an example of what would be considered a small vessel. Senator B. Stevens stated that a 26 to 42-foot vessel would be considered a small vessel. The equipment has been referred to as a hook and line type of equipment. A vessel manned by one or two crewmembers could operate up to eight jig machines. Senator B. Stevens stated that there are differing allocations specified for gear types: jig fisheries; long line fisheries; cod fisheries; and trawl fisheries would each have separate allocations. The jig fishery is typically the entry-level fishery, as it would not require a lot of capital investment. People get into that fishery at a young age and then could move through the various fisheries. Some people have stayed in that fishery and earned a good wage for many years. This fishery is the perfect example of the harder you work, the more fish you catch. Senator B. Stevens stated that the main concern about this legislation by people in the jig fishery is the belief that this program would be imposed on them. Since this was the concern and no effort in support of the program was forthcoming, the Managers therefore excluded this entry-level fishery from the program. Following that action last year, the group was satisfied. However, "it's a different story this year". 10:07:22 AM Senator Olson asked which fish the jig fishery primarily harvests. Senator B. Stevens responded that they primarily fish Pacific Cod as well as some rockfish. Senator Stedman remarked that the jigs resemble downriggers used by sport fisherman to fish salmon. Senator B. Stevens reiterated that this is a controversial bill; however, it would allow the Managers to develop a new regime of management at the request of participants in certain fisheries. "It is contingent upon" the Legislature to provide them the ability they deem necessary while insuring that the program would not be forced on those fisheries that do not desire it. Co-Chair Green voiced appreciation for the explanation provided by Senator B. Stevens. Senator B. Stevens provided a handout titled "Table 10:South Alaska Peninsula Area state-waters Pacific Cod fishery openings, 1997- 2004" [copy on file] which depicted the fishery opening dates for the various years. 10:09:46 AM DONNA JONES testified via teleconference from Kodiak and spoke in opposition to the bill. This legislation is contrary to the State's Constitution in two ways: it would deny citizens the right to the legislative process by allowing the Board of Fisheries and the Limited Entry Commission "to make decisions that should be made at the Legislative level"; and it would allow an "allocation or harvest use privilege to our fleet fishery resources", many of which would be given to out-of-State recipients. This allocation system of dedicated access privilege would seriously" reduce the State's fishery resource benefits to State residents: these benefits are an entitlement that is guaranteed by the State's Constitution. "Both of these issues are seriously infringing upon my rights as an Alaskan citizen." In recent testimony to the Senate Resource Committee, she had declared that, "the true purpose of this bill is not to end the race for fish, but it's about the race to get the fish allocated". Ms. Jones stated that the federal Rationalization Plan and its plan to allocate fishing quota to boat owners according to their history would exert "great pressure" on the State to allocate its fisheries with the hope "of slowing down the number of fish going to processing plants". However, such allocations would not control "the amount or time of the deliveries to the docks. The flood of fish which fueled this bill and the federal Rationalization is that of the trawl Pollock and long line cod fleet." Due to her experience as a plant and fleet manager of a local Alaskan cannery, she could attest "to the need to limit the trawl and long line fleet to avoid the flood of fish to the dock". Efforts such as setting gear, weight, and time limits such as limiting catches to 5,000 pounds of black cod within any five-day period in certain areas of the State are already in place to control the amount of fish going to the docks. These things could be accomplished within the existing State regulatory systems. Annual quotas are established that both protect the overall biomass and allow fishermen to fish. She suggested that instead of establishing a fleet with no fish limits, a preferred alternative could be to set the amount of fish that could be brought in within a time specific period. For example: one delivery per vessel per seven days. The fishing vessel would continue to maximize its profits for the trip and the seafood processing plants could accommodate one load per vessel per week instead of a rush of three or four deliveries per week. Ms. Jones stated that other things that should be considered would be the safety issue and "the slowing down of the total amount of pounds which would allow the processing plants to focus on better quality and value added products". Ms. Jones continued that the differences between the federal and State interests are significant. "The federal government caters to national interests and recipients, that being every person in the United States. The State of Alaska represents the best interests of its citizens"; that is the basis of her opposition to the bill. It is not in her "best interest for the State to allow the allocation of our fishery resources, let alone to outside interests". Were this legislation enacted, the State would suffer the "loss of jobs due to consolidation, the loss of jobs due to the possible formation of co-ops or associations, the loss of equal access to entry level fishermen, the loss of revenue to our communities, and the loss of control over our State fishery resources all of which could ultimately cause the demise of many of our coastal communities and the families that are reliant upon our fishery resources." Ms. Jones opposed "the privitization of the State's pubic resources". The State "must implement the State's existing regulatory tools to control the problems" that it is facing. Due to the magnitude of the changes that would be imposed by the dedicated access privilege specified in this bill, she would request that "a socio economic impact study" be conducted prior to the passage of this bill. [NOTE: Co-Chair Wilken assumed chair of the meeting.] 10:14:42 AM Senator Olson asked whether the testifier was a resident of the State. Ms. Jones affirmed that she was. Senator Stedman commented that the action of moving the regulation of fisheries from "the legislative arena" and to the Board of Fisheries and other associated boards has "worked very well". Ms. Jones declared that she has no problem with the Board of Fisheries or the Limited Entry Commission "being greatly involved in the fishing industry". However, "the allocation of the fishing rights is something that nobody should have the right to do." 10:15:51 AM GLEN CAROLL testified via teleconference from an offnet site and informed the Committee that he is a lifelong Alaskan whose who has been involved in fisheries for forty years with the last ten being in the cod fishing industry. He spoke in support of the bill, as he forecast no future for the manner in which the fishery is currently being conducted. Under the current "derby style, open to entry, Olympic competitive fishery", the fishing "seasons are getting shorter and shorter" and the manner in which the "fish are presented to the world is really backward marketing". Mr. Caroll informed the Committee that the Kodiak Pollock/cod season was ten months long in 2000, in the year 2005, the season was 11 days long. He likened the status quo to "the bow of the Titanic, it's already under the water and we just can't keep re- arranging the deck chairs and asking the band to keep playing". Mr. Caroll shared that he and his wife conduct direct marketing to customers in Korea and on the east coast of the U.S. on a small scale. The marketing of Alaskan cod "is analogous to the Western states' cattlemen slaughtering three-quarters of their cows on the fourth of July and expecting the market to absorb millions of pounds all at once". That is how the State of Alaska's codfish resource is marketed. The season opens January first and during the next six to eight weeks, three-quarters of the allowable catch in the Gulf of Alaska is harvested and "we can't figure out why we get thirty cents for our fish when in Boston and Iceland, they get one dollar". The entirety of "distributors and buyers across the country know immediately that they just have to watch with open hands" because the docks and the processors in the State of Alaska "are awash with fish for six weeks". The price spirals downward, as "desperate" fishermen "sell their fish at a cheaper and cheaper price". Mr. Caroll attested that until the "race for fish" is eliminated, the quality of Alaskan fish would never be at the level it should be nor match that of other places' fish. Mr. Caroll stated that some have compared the proposed system to the IFQ program. Rather than the criticisms in this regard being about the IFQ program, they are in regard "to the implementation" of the system. He avowed that there is "nothing wrong with the concept of a quota share program", as reflected by the price of IFQ halibut having tripled under the process and the fish's more frequent availability. Elimination of "the race" for fish is the only sane way to conduct business". Until fishery resources are operated in a manner other than a derby style and are treated as a business, the resource would "never truly be maximized". "This bill would begin the process that would lengthen and create more shore jobs in more communities throughout the State." It would increase the value and quality of the fish. Mr. Caroll stated that the Task Force process behind this legislation has often been criticized as not being a real public process. However, as a participant on the Task Force, he attested that the work that had been conducted for more than one and a half years had been an exceedingly public process. The general tone that prevailed throughout the process, which was led by then Board of Fish chair Ed Dersham, was one welcoming "good ideas". The meetings included discussions, debates, and brainstorming sessions. 10:22:06 AM JULIE BONNEY, Representative, Alaska Groundfish Databank Association and a 23-year Alaska resident testified via teleconference from an offnet site and informed the Committee that Alaska Groundfish Databank is a group of shore-based trawl fisherman and shore-based processors who support this legislation. It would allow the Board of Fish and the Commission to explore fishery restructuring for groundfish fisheries inside the State's three-mile zone using a dedicated access privilege. The members appreciate the MOU detailing how the public process would be conducted as well as the fiscal note that would allow hearings to be held in the affected communities. The bill is "process legislation" that would allow Association members to participate in the effort to develop fair and equitable plans in conjunction with the Board of Fish and the Commission. Ms. Bonney stated that while the process could be likened to entering the unknown with "one's entire livelihood at stake", fishery restructuring must occur in the Gulf Groundfish fisheries. "The present management structure focuses on catching the most amount of fish instead of extracting the most value for every fish that is caught." The fishing industry must be provided the tools that would allow them to be competitive in the global markets, specially increasing pressure from the global farmed fish industry. Other things that should be addressed include 12-hour fisheries in which nine million pounds of fish are harvested and must be processed. She noted that the only open access fishery on the west coast of the U.S. is the Prince William Sound Pollock fishery, and this year, the total capacity of the 12 vessels that fished it was twice the allowable catch. Ms. Bonney stated that another consideration is the confusion experienced by those participating in the federally managed program: were they to fish within the three-mile limit they would be under the State jurisdiction and were they outside of that three-mile limit they would be under the federal jurisdiction. Were this legislation adopted and the process completed, the federal/State components could be melded. Those federal participants fishing within the three-mile limit under a federal program would do so with all the appropriate activities such as observer coverage and other regulations. Ms. Bonney also urged that the historical investment process also consider the impact on fishery dependent communities. During discussions with the Alaska Attorney General's representative, it was apparent that one of the biggest hurtles in developing a dedicated access privilege would be establishing a program that would be acceptable under the State's Constitution. Rather than this process establishing something akin to the IFQ process, the design must be one of a leasing privilege wherein the State of Alaska would maintain the ownership on the resource. Further discussions regarding such things as the duration of the privilege or whether a portion of the history would revert back to the State so that it could be reallocated to second generation fishers must be developed in a process in which the public could participate. Ms. Bonney highlighted the fact that an analysis [copy not provided] conducted by the Department of Fish and Game of the fishers that participate within the three-mile limit clearly reflected that, "it is truly an Alaska fishery". This is supported by the fact that 96-percent of the Kodiak long-line cod fishery; 95-percent of the Kodiak cod fishery; and 47-percent of the Kodiak trawl fishery was harvested by Alaskan vessel owners and hired skippers. The claim that the majority of the resource would be allocated to out-of-state entities "is not true". [NOTE: Co-Chair Green resumed chair of the hearing.] Ms. Bonney urged for passage of the bill, as this legislation would allow the process to begin. 10:29:01 AM LANCE NELSON, Assistant Attorney General, Department of Law, testified via teleconference from an offnet site and informed the Committee that, as the attorney assigned to represent the Board of Fisheries, he worked on the development of the bill with the Board, the Commission, and the sponsor. An informal Attorney General opinion was issued in 1995 that stated that a program like this would allow for the development of a program that would likely "pass Constitutional muster". While there could be the risk that the State Court System could identify some flaw in whatever program might be developed, the process established by this bill "would probably be the best possible way to develop and refine a program…" Therefore, the Department's position has continued to be that a dedicated access privilege program would have a "very decent chance at surviving any Constitutional challenge." 10:31:23 AM ED DERSHAM, Vice-Chairman, Alaska Board of Fisheries, testified via teleconference from an offnet site and reviewed the history leading to the development of the process proposed in this bill. He noted that he had chaired the Alaska Groundfish Rationalization Committee task force which had conducted nine days of public hearings over a one-and-a-half year period, in addition to the public input that was heard during regularly scheduled Board of Fisheries meetings. As Ms. Bonney had testified, it was noted early in the process that most of the State's fishing industry participants, specifically those in the cod fishery, were Alaskan residents. It was clear that finding a way to allocate at least partially based on history of participants would be a good thing for Alaskans in reaction to the federally rationalized fishery outside of the three-mile zone. The Board also realized that current Board authority would not allow such an allocation, therefore efforts were undertaken to address the issue in an allowable manner. Mr. Dersham stressed that "the problem" with the Board's "current authority is that, while it works well in regards to many of the Board's responsibilities, the authority does not allow for a slower rate for fish harvesting nor does it provide protection "to participants in State waters in relation to changes in federal fisheries in adjacent waters". The only tools available to the Board through which to slow the rate of fish would create further "economic inefficiently". Even though additional restrictions have been placed on the State cod fishery, the times allotted for harvesting fish have worsened over the past two years and have not served to slow down the harvesting. "Almost ridiculous economic inefficiencies" would result were the Board to implement "extreme measures" to try to address the forthcoming federal rationalization plans; therefore, the response was to support the task force efforts as included in this legislation. Mr. Dersham stated that the MOU developed by the Commission and the Board outlined the public process that must occur were this legislation adopted. The desires and needs of the fisheries must be involved in the process. The $45,600 Department of Fish and Game fiscal note would specifically allow that initial public hearing process to occur in communities most affected by a dedicated access privilege program. Mr. Dersham stated that the overall benefits provided by the adoption of this process legislation would be intended to directly benefit coastal communities and Alaska resident participants to the extent possible. The result would be a more comprehensive potential solution to some of these "races for fish" than could be developed under the current authority. Co-Chair Green asked whether there were any questions regarding the April 25, 2005 Senate Resources' Letter of Intent that accompanies the bill or the MOU. There being none, Co-Chair Green stated that the bill would be HELD in Committee in order for further review. CS FOR SENATE BILL NO. 124(L&C) "An Act relating to requirements to obtain and maintain a fisheries business license; relating to security required of fish processors and primary fish buyers; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. 10:38:03 AM CHUCK HARLAMERT, Juneau Section Chief, Tax Division, Department of Revenue, stated that this bill would "increase the process of accountability for repayment of obligations that support the industry" and improve the protection of employees and fishermen who work for or sell to processors. Mr. Harlamert stated that current law requires a processor to be current on their taxes under Title 43 in that Section 1 of the bill would modify current law to require a processor to be current on their Employment Security Contributions (ESC), current on any Occupational Safety and Health Act (OSHA) fines, current on their Seafood Marketing Assessment, and current on local fish taxes. Co-Chair Green noted that Members' packets contain a Department of Revenue overview [copy on file]. Mr. Harlamert expressed that the Department's overview is very detailed. 10:41:22 AM Co-Chair Green also noted that Members' packets also include a six- page Fisheries License and Bond Bill Sectional Analysis from the Office of the Attorney General [copy on file]. Mr. Harlamert affirmed. Mr. Harlamert continued that Section 2 of the bill would modify the process through which the Department of Labor and Workforce Development could collect any unpaid ESC from a processor's labor bond in that it could allow a processor to secure payment of the estimated tax for the year using security that had been provided to the Department for the prior year. Mr. Harlamert noted that Section 3 of the bill is the most complicated section of the bill. It would change bonding requirements and the conditions through which employees could gain satisfaction from the bond. Such efforts would assist in aligning processors' bond levels with the risks. It would ease the bond rules involved when a processor fails to pay employees or fishermen. [NOTE: Due to poor recording quality, the testifier's comments were difficult to discern.] Co-Chair Green understood that the primary objective of the legislation is located in Section 3 of the bill. Mr. Harlamert affirmed. Section 3 would make "the bond levels more responsive to processors behavior". A processor who fails to compensate fishermen or employees "would be more likely under this bill to have their bond level go up." In addition, they would be unable to utilize real property in lieu of bonds. Co-Chair Green ascertained that a processor's bond level requirement could be increased. She asked the point at which a processor's obligation would create a warning that could prohibit them from obtaining and maintaining their fisheries business license or might subject them to prosecution. Mr. Harlamert stated that a processor would be prohibited from getting their license were they delinquent on their Title 43 taxes, ESC, OSHA fines, or the Seafood Marketing Assessment. This would be a very effective tool in getting those payments. Co-Chair Green understood that the bond requirement component of the bill is a separate issue from the licensing requirements. Mr. Harlamert stated that the bill has two major components: one being the requirements for licensure and the other being the bonding component. 10:43:58 AM Senator Stedman stated that, upon reviewing the accompanying fiscal notes, it appears that this bill might generate revenue by furthering the collection of the Seafood Marketing Assessment. In addition, he wondered if the State's imposition of a cash bond on a processor who got in trouble for lack of payment, might jeopardize that processor ability to operate. It could be assumed that a processor who had not paid their obligations might be having a cash flow problem. 10:44:58 AM Mr. Harlamert communicated that the State would have "better luck collecting the Seafood Marketing Assessment", as presently keeping current on that is not a requirement; however, only a "relatively few" do not currently pay that tax. Mr. Harlamert stated that the elements that would affect a processor's bond would be whether one's employees, fishermen, or unemployment security contributions had been paid. Currently the bond level would be unaffected were a processor to satisfy a judgment with another asset such as cash. This bill would "change that in that the mere existence of a judgment in excess of $10,000 would trigger" increasing the bond level from $10,000 to $50,000. 10:47:09 AM Co-Chair Green asked whether the Committee's questions thus far could be more appropriately answered by the Department of Revenue or the Department of Labor and Workforce Development. PATRICK SHIER, Acting Deputy Director, Employment Security Tax, and Chief, Division of Employment Security, Department of Labor and Workforce Development, stated that Mr. Harlamert has handled the questions quite well. This legislation would allow the Department of Labor and Workforce Development to move against a bond more quickly than it could currently; the quicker the Department could act, the quicker that problems could be resolved before either the fish, cash, or processor left the State. Co-Chair Green appreciated that information. Mr. Harlamert stated that under current law, any processor who could demonstrate a piece of real property located in the State equal to the required bond level would be excused from the bond requirement. This would be acceptable were no trouble to arise; however, the process of foreclosing against that real property to satisfy a judgment could be problematic. This bill would restrict the use of real property in a case where a processor had a record of failure to pay, and a cash bond would be required. Mr. Harlamert stated that the changes in the bond requirements would make the process more responsive and easy to access. Senator Stedman ascertained that the real concern being addressed by the proposed bond changes would be a floating processor who might be in the State today but gone tomorrow as opposed to a fixed shore-side processor who might get into a liquidity bind due to market conditions or mismanagement. 10:49:59 AM Mr. Harlamert stated that established longtime corporate citizens of Alaska tend to have real property and they are allowed to use that property in lieu of the bond. Floating or itinerant processors did not have similar connections to the State and therefore a cash bond was required from them to protect fishermen and employees. There has been no change in the basic bond level or the right to use real property in lieu of cash requirements. The only change would be in the case of a processor who displayed a history of non- payment. The consequences would be more immediate and "more realistic". Co-Chair Wilken understood therefore that were he a small processor, he would be required to get a bond. To that point, he asked whether his house could be recognized as collateral in lieu of cash provided he had no prior judgment history. Mr. Harlamert responded that Co-Chair Wilken would be required to purchase a bond were he to buy fish in the State unless he had real property he could use in lieu of the cash bond. Co-Chair Wilken understood therefore that a portion of his house could be used unless a judgment had been levied against him. 10:52:33 AM Mr. Harlamert affirmed. He communicated that the judgment issue could be revisited after a few years. Mr. Shier stated that the Department of Labor and Workforce Development supports this bill because it would require that all taxes, assessments, and judgment must be current. Thus, it would allow "the slate to be clean" going into the coming year. It should be noted that processors are provided "ample opportunities" to address the situation through options such as deferred payment contracts and negotiated settlements. The Department "recognizes the fact the employers provide jobs. That is very important" and no effort is made "to hobble the folks that want to do the right thing or …. might fall on hard times in a particular year." Mr. Shier stated that the bill would also provide an incentive for a processor to contact the Department and rectify a situation. Sec. 3 would specify the length of time that would be available in which to secure a bond. The bond is important, as sometimes "that is the only thing that is left after the fish is gone, the cash is gone and the employer is gone". Many things could contribute to the need for a higher bond amount. The Department supports the language to that point. Co-Chair Wilken moved to report the bill from Committee with individual recommendations and accompanying fiscal notes. There being no objection, CS SB 124(L&C) was REPORTED from Committee with zero fiscal note #2, dated February 4, 2005 from Department of Commerce, Community and Economic Development; zero fiscal note #3, dated December 16, 2004 from Department of Fish and Game; zero fiscal note #4, dated February 24, 2005 from the Employment Security Division, Department of Labor and Workforce Development; zero fiscal note #5, dated February 24, 2005 from the Division of Labor Standards and Safety, Department of Labor and Workforce Development, and new zero fiscal note, dated April 1, 2005 from the Department of Revenue. ADJOURNMENT Co-Chair Green adjourned the meeting at 10:56 AM.