Legislature(2017 - 2018)SENATE FINANCE 532

01/25/2017 09:00 AM Senate FINANCE

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Audio Topic
09:00:38 AM Start
09:01:42 AM Presentation: Intent Language Status Update
09:47:57 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Intent Language Status Update TELECONFERENCED
Alaska Seafood Marketing Institute
                 SENATE FINANCE COMMITTEE                                                                                       
                     January 25, 2017                                                                                           
                         9:00 a.m.                                                                                              
9:00:38 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair  MacKinnon  called  the  Senate  Finance  Committee                                                                    
meeting to order at 9:00 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Click Bishop, Vice-Chair                                                                                                
Senator Mike Dunleavy                                                                                                           
Senator Donny Olson                                                                                                             
Senator Natasha von Imhof                                                                                                       
MEMBERS ABSENT                                                                                                                
Senator Peter Micciche                                                                                                          
ALSO PRESENT                                                                                                                  
Alexa   Tonkovich,   Executive  Director,   Alaska   Seafood                                                                    
Marketing Institute, Juneau.                                                                                                    
^PRESENTATION: INTENT LANGUAGE STATUS UPDATE                                                                                  
9:01:42 AM                                                                                                                    
ALEXA   TONKOVICH,   EXECUTIVE  DIRECTOR,   ALASKA   SEAFOOD                                                                    
MARKETING  INSTITUTE,  JUNEAU,  highlighted  the  PowerPoint                                                                    
presentation,  "Alaska Seafood  Marketing Institute:  Senate                                                                    
Finance Committee"  (copy on file). She  shared the subjects                                                                    
that she would cover in the presentation.                                                                                       
Ms.  Tonkovich  looked  at  slide 2,  "What  is  the  Alaska                                                                    
Seafood Marketing Institute":                                                                                                   
     •A Partnership of public and private sectors                                                                               
     •A Public corporation that fosters effective alignment                                                                     
     with industry marketing efforts                                                                                            
     •A Governor-appointed Board of Directors: five                                                                             
     processors, two commercial harvesters                                                                                      
     •Alaska's official seafood promotion arm, supports                                                                         
     Alaska seafood industry through promotion of Alaska                                                                        
     seafood products, education and research                                                                                   
Ms. Tonkovich  addressed slide  3, "Alaska  Seafood Industry                                                                    
Economic Impacts":                                                                                                              
     Seafood Industry Directly Employs 60,000 Workers                                                                           
     Largest Private Sector Employer in the State                                                                               
     Contributes Approximately $138.6 Million in Taxes,                                                                         
     Fees, and Self-Assessments Which Help Fund State,                                                                          
     Local and Federal Government                                                                                               
    Industry Operates 8600 Vessels and 176 Shore Plants                                                                         
Ms. Tonkovich  discussed slide 4, "Alaska  Seafood Marketing                                                                    
Institute Volume  and Value by  Species." The  charts showed                                                                    
the  value and  volume of  the Alaska  seafood harvest.  The                                                                    
volume was the average of  2014 and 2015, at approximately 6                                                                    
billion  pounds.   The  chart   showed  the   importance  of                                                                    
whitefish  in  the  industry. She  remarked  that  the  real                                                                    
strength  of the  industry was  the diversity.  The industry                                                                    
was not  dependent on  the landmark  species, but  the value                                                                    
came from many different species.                                                                                               
Co-Chair  MacKinnon requested  a regional  breakdown of  the                                                                    
seafood  sources.  Ms.  Tonkovich  agreed  to  provide  that                                                                    
Ms. Tonkovich  highlighted slide  5, "Alaska  Seafood Export                                                                    
     Export to 120 Countries                                                                                                    
     1.1 Million MT and $3.3 Billion                                                                                            
     Groundfish 55 percent                                                                                                      
     Salmon 25 to 33 percent                                                                                                    
     China - Largest Partner                                                                                                    
     EU and Japan - Largest Markets                                                                                             
     Exports = 60 to 70 percent of value                                                                                        
Senator Olson queried the role  of the Community Development                                                                    
Quota  (CDQ)  Ms.  Tonkovich  replied  that  the  CDQs  were                                                                    
partners of  ASMI. She  shared the  processors may  pay into                                                                    
the  ASMI  landing  tax.  She   agreed  to  provide  further                                                                    
Senator   Olson  wondered   whether  there   was  a   direct                                                                    
relationship with CDQ. Ms. Tonkovich  replied that they were                                                                    
partners, and worked closely when possible.                                                                                     
9:05:05 AM                                                                                                                    
Ms.  Tonkovich  addressed  slide  6,  "Historical  Ex-vessel                                                                    
Value and Harvest Value":                                                                                                       
     Some decline in value due to strong dollar,                                                                                
    oversupply, smaller harvests of high-value species                                                                          
Ms.   Tonkovich  highlighted   slide   7,  "Alaska   Seafood                                                                    
Marketing Institute Global Factors Impacting Value":                                                                            
     Negative Factors                                                                                                           
          Strong dollar hurts U.S. exporters and helps                                                                          
          Eco-labels    diminish    Alaska's   ability    to                                                                    
          distinguish on sustainability                                                                                         
          Competition from farmed and imported seafood                                                                          
          Volatility of wild harvests, decreased quota for                                                                      
          key species                                                                                                           
          Russian embargo and Ukrainian conflict                                                                                
     Positive Factors                                                                                                           
          Global salmon supplies tightening                                                                                     
          Stronger Yen                                                                                                          
          Long term demand vs. supply                                                                                           
          Strong Alaska Seafood brand                                                                                           
Ms.  Tonkovich addressed  slide 8,  "Highlight International                                                                    
     Alaska Seafood, FOREVER WILD, Food Truck Visits                                                                            
     Street/Food Fairs in Germany                                                                                               
Ms. Tonkovich  looked at  slide 9,  "Highlight International                                                                    
     E-COMMERCE PLATFORMS, Used Widely In ASIA and EU                                                                           
     WE ARE WILD: SALMON SOMMELIERS                                                                                             
Ms. Tonkovich  addressed slide 10, "August  10th Alaska Wild                                                                    
Salmon Day":                                                                                                                    
     First ever Alaska Wild Salmon Day                                                                                          
     EXCITEMENT GENERATED THROUGH:                                                                                              
          Snapchat geofilter                                                                                                    
          Social Media Channels                                                                                                 
          Traditional Media Relations                                                                                           
     Digital and PR efforts secured more than                                                                                   
     94 MILLION IMPRESSIONS.                                                                                                    
Ms. Tonkovich discussed slide 11, "Good News!":                                                                                 
     U.S. Seafood Consumption up by Nearly One Pound Per                                                                        
     Person in 2015                                                                                                             
     This is the biggest leap in seafood consumption in 20                                                                      
Co-Chair  Hoffman  queried  the  species  with  the  largest                                                                    
growth.  Ms. Tonkovich  replied that  shrimp was  the number                                                                    
one species consumed by Americans.                                                                                              
Co-Chair Hoffman specifically wondered  what species had the                                                                    
greatest growth.  Ms. Tonkovich believed it  was shrimp. She                                                                    
stressed  that there  was a  hope  that it  would be  Alaska                                                                    
Co-Chair MacKinnon  queried the  amount of  seafood consumed                                                                    
by the average U.S. citizen.  Ms. Tonkovich believed that it                                                                    
was fifteen  pounds per  person, but  agreed to  provide the                                                                    
exact number.                                                                                                                   
Ms.   Tonkovich   highlighted   slide   12,   "International                                                                    
Recognition for RFM":                                                                                                           
     Alaska    Responsible   Fisheries    Management   (RFM)                                                                    
     successfully  benchmarked  against  Global  Sustainable                                                                    
    Seafood Initiative (GSSI)'s Global Benchmark Tool.                                                                          
     GSSI  is  a  global   platform  to  streamline  seafood                                                                    
     purchasing decisions while promoting sustainability.                                                                       
     Alaska RFM is the first certification to do so.                                                                            
Ms. Tonkovich looked at slide 13, "Highlight Swap Meat":                                                                        
     The  ASMIUS Foodservice  program  sponsored a  national                                                                    
     "Swap Meat" competition for professional chefs.                                                                            
     CHEFS  WERE ASKED  TO SWAP  THE  MEAT IN  A RECIPE  FOR                                                                    
     ALASKA SEAFOOD AND THEN SUBMIT THE NEW RECIPE TO ASMI                                                                      
9:10:27 AM                                                                                                                    
Ms. Tonkovich addressed slide  14, "Highlight Alaska Brewing                                                                    
Co-op Promotion":                                                                                                               
     CO-OP between  ASMI, Alaska  Brewing Company  and Texas                                                                    
     retailer H.E.B                                                                                                             
     IN-STORE  DISPLAYS  near  the  seafood  department  and                                                                    
     sampling at 70 stores                                                                                                      
     INSTANT-REDEEM COUPON                                                                                                      
Ms. Tonkovich  displayed slide  15, "In-state  Outreach Town                                                                    
Hall Meetings":                                                                                                                 
     Series of informal town  hall-style meetings to provide                                                                    
     harvest and market updates                                                                                                 
     2016: Anchorage, Juneau, Cordova, Petersburg and                                                                           
     Where to next?... Stay Tuned!                                                                                              
Ms. Tonkovich addressed slide  16, "Alaska Seafood Marketing                                                                    
Institute  Budget." She  stated that  each year  one-half of                                                                    
one  percent  of the  vessel  value  of Alaska's  commercial                                                                    
seafood harvest was paid by  processors to the Department of                                                                    
Revenue (DOR). The revenue  was statutory designated program                                                                    
receipts  (STPR),  and was  $9.6  million  collected in  the                                                                    
year. She stated that ASMI  also received approximately $4.5                                                                    
million annually  in federal funds  through the  USDA Market                                                                    
Access  Program.   Those  funds   were  used  to   fund  the                                                                    
international programs. She stressed  that the federal money                                                                    
was  a competitive  grant, and  ASMI competed  annually with                                                                    
100  other  commodity  groups   including  beef,  pork,  and                                                                    
Ms. Tonkovich looked at slide  17, "Alaska Seafood Marketing                                                                    
Institute." The slide was a  visual breakdown of the revenue                                                                    
Ms. Tonkovich addressed slide  18, "2016 Legislative Intent:                                                                    
     It is the intent that ASMI develop a plan to phase out                                                                     
     reliance on UGF by FY19                                                                                                    
     •Reduced Spend Plan                                                                                                        
          •Gradual, sustainable ramp down of expenditures                                                                       
     •Supplemental Funding Task Force                                                                                           
          •Additional federal grants awarded                                                                                    
     •Options to Increase Industry Revenue                                                                                      
          •According to statute, revenue can be increased                                                                       
          from .5 percent to .6 percent, raising an                                                                             
          additional $1 million annually                                                                                        
Ms. Tonkovich discussed slide  19, "Alaska Seafood Marketing                                                                    
Institute Projected  Budget." She stated  that in FY  16 the                                                                    
ASMI board of  directors reduced the spend  plan to preserve                                                                    
funds  into FY  17.  They realized  that without  additional                                                                    
revenue,  and without  significant spending  reductions, the                                                                    
current  level  of  expenditures was  not  sustainable.  The                                                                    
table  showed that  ASMI's  spend plan  was  reduced in  the                                                                    
current year.  She stated that  ASMI would slowly  ramp down                                                                    
expenditures to a more sustainable  level. She stressed that                                                                    
ASMI must maintain protect and  maintain federal USDA Market                                                                    
Access Program funding  of $4.5 million per  year. The grant                                                                    
required a match, which was  previously provided through the                                                                    
general  funds, but  now must  be  matched through  industry                                                                    
funds.  She  stated  that   it  may  disproportionately  the                                                                    
domestic   marketing   program,   because  the   grant   was                                                                    
exclusively for international marketing.                                                                                        
Ms. Tonkovich displayed slide  20, "2016 Session Legislative                                                                    
Intent: Positions":                                                                                                             
     It is the intent of the legislature that all ASMI                                                                          
     positions are in Alaska by FY19                                                                                            
     Domestic    U.S.    Retail,    Foodservice    Programs,                                                                    
     Sustainability (6 PCNs)                                                                                                    
          •Cost-Effective Market Access                                                                                         
          •Relationships and Interaction with Marketing                                                                         
          •Effective Marketing Impacts Alaskans                                                                                 
9:15:47 AM                                                                                                                    
Co-Chair Hoffman surmised that there  were no plans to bring                                                                    
the positions to  Alaska. He stressed that there  had been a                                                                    
decline in  other jobs.  He queried the  total value  of the                                                                    
positions that may assist the  Alaska economy. Ms. Tonkovich                                                                    
replied  that  the positions  in  Seattle  was estimated  at                                                                    
$916,944 for FY 17.                                                                                                             
Co-Chair  Hoffman  wondered  whether  that  number  included                                                                    
benefits. Ms. Tonkovich replied in the affirmative.                                                                             
Co-Chair Hoffman  queried the support budget  of the Seattle                                                                    
office. Ms.  Tonkovich replied that the  Seattle office rent                                                                    
was $82,706.                                                                                                                    
Co-Chair  Hoffman  wondered  whether  the  board  felt  that                                                                    
Alaskans  did  not  understand  salmon  and  other  resource                                                                    
marketing. He  queried the justification to  not discuss the                                                                    
issue. Ms. Tonkovich agreed to  inform the board of Co-Chair                                                                    
Hoffman's concerns.                                                                                                             
Co-Chair Hoffman felt  that it might be wiser  to return the                                                                    
office to  Alaska. He  felt that  Alaskans had  the capacity                                                                    
and capability of operating ASMI.                                                                                               
9:20:30 AM                                                                                                                    
Senator von  Imhoff queried the  amount of the  state match.                                                                    
Ms.  Tonkovich  responded  that  it  was  not  specified  in                                                                    
federal  statute. She  stated that  typically ASMI  tried to                                                                    
match one-to-one,  but was  no longer able  to do  that. She                                                                    
stressed  that, because  it was  a competitive  grant, there                                                                    
were many factors that ASMI was scored.                                                                                         
Co-Chair  MacKinnon   remarked  that  the   legislature  had                                                                    
previous  asked ASMI  to provide  a plan  on reduced  use of                                                                    
general  fund dollars,  based on  the critical  condition of                                                                    
the savings  accounts. She appreciated  the work of  ASMI to                                                                    
market  Alaska   products,  but  she  felt   that  the  real                                                                    
conversation was  related to slide  19. She felt  that slide                                                                    
19 did  not provide much insight.  She felt that ASMI  had a                                                                    
limited response  to the question. She  encouraged the board                                                                    
to  discuss the  use of  the  matching funds,  and how  they                                                                    
could maintain  the federal grant  the 50  percent reduction                                                                    
of general fund  spending. She felt that the  state could no                                                                    
longer maintain  the program. She shared  that December 2015                                                                    
or 2016  showed Alaska as  higher than the  national average                                                                    
of unemployment.  She believed that Alaska  was currently at                                                                    
the highest unemployment rate of  all the states. She looked                                                                    
at  slide 3,  and wondered  how many  Alaska employees  were                                                                    
residents and nonresidents. Ms.  Tonkovich agreed to provide                                                                    
that information.                                                                                                               
Co-Chair MacKinnon looked at slide  19, and felt that it was                                                                    
difficult to  look at the  ending carryforward  balance. She                                                                    
wondered  whether there  was a  way to  eliminate the  FY 17                                                                    
savings  draw,  because  of the  critical  position  of  the                                                                    
state. Ms.  Tonkovich replied that  the intent  language was                                                                    
to replace  general funds  by FY 19.  She shared  that there                                                                    
was not a discussion beyond  that, because there was nothing                                                                    
beyond that intent language.                                                                                                    
9:25:33 AM                                                                                                                    
Co-Chair   MacKinnon  stressed   that  it   was  the   fifth                                                                    
consecutive   year   that  the   legislature   substantially                                                                    
withdrew from savings at billions  of dollars. She supported                                                                    
ASMI,  but  hoped  to  reduce  general  fund  spending.  She                                                                    
stressed  that   she  wanted  to  examine   the  prospective                                                                    
spending in FY  18. She wondered whether there was  a way to                                                                    
eliminate the  general fund spending  with the  least amount                                                                    
of harm,  so ASMI could use  its own reserves. She  hoped to                                                                    
work  together. She  looked at  page  2 of  the plan,  which                                                                    
stated that  the ASMI board  needed flexibility to  react in                                                                    
changes  in market  conditions  or  disasters. She  stressed                                                                    
that  other  departments   had  a  "lever"  to   go  to  the                                                                    
Legislative  Budget  and  Audit   (LB&A)  Committee  in  the                                                                    
interim  for additional  spending authority.  She understood                                                                    
that it  was "hollow money", but  felt that it was  a way to                                                                    
reflect the  downturn in the  state's economy.  She wondered                                                                    
how  ASMI would  respond  to a  total  elimination one  year                                                                    
sooner, given that oil prices  were starting to recover, but                                                                    
there was  still a $2.7  billion deficit. She  stressed that                                                                    
the  governor's budget  did not  fund community  assistance,                                                                    
which was important to the  legislature and the communities.                                                                    
Ms. Tonkovich  replied that  ASMI was at  $2 million  and $1                                                                    
million the following year for  general fund money requests.                                                                    
She stated  that eliminating those funds  would require ASMI                                                                    
to draw down a greater  percentage of their reserve funding,                                                                    
and  slightly reduce  their marketing  spend  plan to  avoid                                                                    
drawing  down to  zero.  She explained  that  ASMI hoped  to                                                                    
maintain its  budget authority, which  she stressed  was not                                                                    
actual  funding, rather  the authority  to collect  funding.                                                                    
She stated that the authority  gave the board flexibility to                                                                    
react  quickly  to  changing   market  conditions,  such  as                                                                    
9:29:13 AM                                                                                                                    
Co-Chair  Hoffman  asked for  the  breakdown  of the  $138.6                                                                    
million that  the industry contributes  in taxes,  fees, and                                                                    
self-assessments   to  help   state,   federal,  and   local                                                                    
governments.   Ms.   Tonkovich   agreed  to   provide   that                                                                    
Co-Chair  MacKinnon  queried  how many  eligible  processors                                                                    
could vote. She understood that  there was a requirement for                                                                    
25 percent  for a question,  and 51 percent  for eligibility                                                                    
for  the processors.  Ms. Tonkovich  agreed to  provide that                                                                    
Co-Chair MacKinnon  asked for the percentage  from 2014. Ms.                                                                    
Tonkovich replied  that the  processors must  represent more                                                                    
than  50 percent  of the  value of  the seafood  landings in                                                                    
each  year. She  agreed to  provide the  number of  specific                                                                    
processors that made up that proportion.                                                                                        
Co-Chair  MacKinnon wanted  to  understand  the voting.  She                                                                    
announced that  other boards were looking  at creative ideas                                                                    
to partner in advertising  for Alaskan products. She queried                                                                    
the  percentage of  tax  used to  fund  ASMI. Ms.  Tonkovich                                                                    
replied that ASMI was currently  at 0.5 percent, and 0.6 was                                                                    
the highest to statutorily assess the industry.                                                                                 
Co-Chair MacKinnon  remarked that the industry  received tax                                                                    
credits.  She  queried the  breakdown  of  the credits.  She                                                                    
shared  that  fishing  had   received  many  beneficial  tax                                                                    
credits,  versus  the benefit  to  the  state. She  wondered                                                                    
whether there was a way  to measure the effectiveness of the                                                                    
food truck  program. Ms. Tonkovich  replied that  there were                                                                    
different performance  measures and metrics for  the various                                                                    
activities.  She shared  that  they measured  participation,                                                                    
sales figures, and consumer research.  She agreed to provide                                                                    
the  specific   evaluation  measures  for  the   food  truck                                                                    
Co-Chair MacKinnon wondered whether  the evaluation of sales                                                                    
would  show  sales  growth in  the  areas  with  advertising                                                                    
programs.  Ms. Tonkovich  replied the  there were  different                                                                    
factors in markets  and programs. She stated  that the sales                                                                    
were measured,  if the  sales were  promoted. She  agreed to                                                                    
provide further information.                                                                                                    
Co-Chair  MacKinnon   wondered  whether  the   dollars  were                                                                    
Senator von  Imhof wondered  what it  meant to  work closely                                                                    
with the CDQs.  She asked whether the  CDQs invested revenue                                                                    
into  the seafood  industry.  Ms.  Tonkovich explained  that                                                                    
there was  a CDQ on  the board,  and CDQs were  often worked                                                                    
with in rural communities.                                                                                                      
9:35:54 AM                                                                                                                    
Vice-Chair Bishop  stressed the  importance of  Alaska Hire,                                                                    
even at 80 percent.                                                                                                             
Co-Chair  MacKinnon   wondered  when  the  ASMI   board  was                                                                    
scheduled  to  meet. Ms.  Tonkovich  replied  that the  next                                                                    
scheduled board meeting was May 8.                                                                                              
Co-Chair MacKinnon requested a  response by February 18. Ms.                                                                    
Tonkovich queried the specific requested responses.                                                                             
9:39:01 AM                                                                                                                    
Co-Chair MacKinnon requested a plan for Alaska Hire. She                                                                        
understood the additional costs.                                                                                                
Ms. Tonkovich agreed to follow up on the specifics. She                                                                         
stressed that ASMI had two-thirds of its marketing staff in                                                                     
Senator Dunleavy encouraged a discussion in the ASMI board                                                                      
related to changing some regulations.                                                                                           
9:46:39 AM                                                                                                                    
Co-Chair MacKinnon discussed the following day's agenda.                                                                        
9:47:57 AM                                                                                                                    
The meeting was adjourned at 9:47 a.m.                                                                                          

Document Name Date/Time Subjects
012517 ASMI Legislative Intent Report 12-30-16.pdf SFIN 1/25/2017 9:00:00 AM
Operating Budget FY18
012517 attachment for ASMI Legislative Intent Report 2017.pdf SFIN 1/25/2017 9:00:00 AM
Operating Budget FY18
012517 ASMI Senate Finance - V3.pdf SFIN 1/25/2017 9:00:00 AM
Operating Budget FY18