Legislature(2003 - 2004)

02/12/2004 01:35 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                       February 12, 2004                                                                                        
                           1:35 p.m.                                                                                            
TAPE(S) 04-9, 10                                                                                                              
MEMBERS PRESENT                                                                                                               
Senator Con Bunde, Chair                                                                                                        
Senator Gary Stevens                                                                                                            
Senator Hollis French                                                                                                           
MEMBERS ABSENT                                                                                                                
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Bettye Davis                                                                                                            
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 286                                                                                                             
"An  Act relating  to direct  marketing fisheries  businesses, to                                                               
the  fisheries business  tax,  and to  liability  for payment  of                                                               
taxes  and  assessments  on  the  sale  or  transfer  of  fishery                                                               
resources; and providing for an effective date."                                                                                
     HEARD AND HELD                                                                                                             
SENATE BILL NO. 278                                                                                                             
"An  Act relating  to  fees for  the  inspection of  recreational                                                               
devices, for  certificates of fitness  for electrical  wiring and                                                               
plumbing, for filing voluntary flexible  work hour plans, and for                                                               
licenses  for boiler  operators; and  providing for  an effective                                                               
     HEARD AND HELD                                                                                                             
SENATE BILL NO. 254                                                                                                             
"An Act relating  to the levy and collection of  an assessment on                                                               
certain   tourism-related   and  recreation-related   goods   and                                                               
services,  and repealing  the  levy of  excise  taxes of  certain                                                               
passenger  and   recreation  vehicles;   and  providing   for  an                                                               
effective date."                                                                                                                
     HEARD AND HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB 286                                                                                                                  
SHORT TITLE: DIRECT MARKETING FISHERIES BUSINESS                                                                                
SPONSOR(s): SENATOR(s) STEDMAN BY REQUEST OF SALMON INDUSTRY                                                                    
TASK FORCE                                                                                                                      
01/30/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/30/04       (S)       L&C FIN                                                                                                
02/12/04       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
BILL: SB 278                                                                                                                  
SHORT TITLE: LABOR & WORKFORCE DEVELOPMENT FEES                                                                                 
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
01/23/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/23/04       (S)       L&C, FIN                                                                                               
02/12/04       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
BILL: SB 254                                                                                                                  
SHORT TITLE: TOURISM & RECREATION ASSESSMENT                                                                                    
SPONSOR(s): SENATOR(s) THERRIAULT                                                                                               
01/12/04       (S)       PREFILE RELEASED 1/9/04                                                                                
01/12/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/12/04       (S)       L&C, FIN                                                                                               
02/12/04       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
WITNESS REGISTER                                                                                                              
Senator Bert Stedman                                                                                                            
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Sponsor of SB 286.                                                                                        
Ms. Sue Aspelund                                                                                                                
Federal Management Research Coordinator                                                                                         
Department of Fish & Game                                                                                                       
PO Box 25526                                                                                                                    
Juneau, AK  99802-5226                                                                                                          
POSITION STATEMENT: Supports SB 286.                                                                                          
Ms. Kathy Hansen, Executive Director                                                                                            
Southeast   Alaska   Fishermen's   Alliance   (SEAK   Fishermen's                                                               
9369 North Douglas Hwy.                                                                                                         
Juneau AK 99801                                                                                                                 
POSITION STATEMENT: Supports SB 286.                                                                                          
Mr. Bruce Schactler, President                                                                                                  
United Salmon Association Kodiak (USA)                                                                                          
Kodiak AK                                                                                                                       
POSITION STATEMENT: Supports SB 286.                                                                                          
Mr. Ken Duckett, Executive Director                                                                                             
United Southeast Alaska Gillnetters Association (USAG)                                                                          
Kodiak AK                                                                                                                       
POSITION STATEMENT: Supports SB 286.                                                                                          
Ms. Page Herring                                                                                                                
Cordova District Fishermen United (CDFU)                                                                                        
P.O. Box 939                                                                                                                    
Cordova AK                                                                                                                      
POSITION STATEMENT: Supports SB 286.                                                                                          
Mr. Alan Reeves, Fisherman                                                                                                      
Wrangell AK                                                                                                                     
POSITION STATEMENT:  Supports SB 286.                                                                                         
Mr. Jim Smith, Fisherman                                                                                                        
Wrangell AK                                                                                                                     
POSITION STATEMENT: Supports SB 286.                                                                                          
Mr. Brennon Eagle                                                                                                               
Wrangell AK                                                                                                                     
POSITION STATEMENT: Supports SB 286.                                                                                          
Commissioner Greg O'Claray                                                                                                      
Department of Labor & Workforce                                                                                                 
PO Box 21149                                                                                                                    
Juneau, AK 99802-1149                                                                                                           
POSITION STATEMENT: Supports SB 278.                                                                                          
Mr. Joe Balash                                                                                                                  
Staff to Senator Gene Therriault                                                                                                
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on SB 254.                                                                                      
Mr. Ron Peck, President and CEO                                                                                                 
Alaska Travel Industry Association (ATIA)                                                                                       
2600 Cordova St., Ste 201                                                                                                       
Anchorage AK 99503-2745                                                                                                         
POSITION STATEMENT: Supports SB 254.                                                                                          
Ms. Bettye Adams, owner                                                                                                         
Alaskan Hotel and Bar                                                                                                           
Juneau AK 99801                                                                                                                 
POSITION STATEMENT: Opposes SB 254.                                                                                           
Mr. Chip Thoma                                                                                                                  
Box 21884                                                                                                                       
Juneau AK 99801                                                                                                                 
POSITION STATEMENT: Opposes SB 254.                                                                                           
Mr. Scott Reisland                                                                                                              
Denali National Park                                                                                                            
POSITION STATEMENT: Supports SB 254.                                                                                          
Mr. Dale Fox                                                                                                                    
Alaska Best Birdy                                                                                                               
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports SB 254.                                                                                          
Mr. Alan LeMaster                                                                                                               
Gakona AK                                                                                                                       
POSITION STATEMENT: Supports SB 254.                                                                                          
Mr. John Kreilkamp, Vice President                                                                                              
Cruise West                                                                                                                     
3434 Wentworth                                                                                                                  
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports SB 254.                                                                                          
ACTION NARRATIVE                                                                                                              
TAPE 04-9, SIDE A                                                                                                             
           SB 286-DIRECT MARKETING FISHERIES BUSINESS                                                                       
CHAIR CON  BUNDE called  the Senate  Labor and  Commerce Standing                                                             
Committee meeting  to order  at 1:35  p.m. Present  were Senators                                                               
Gary Stevens, Hollis French and  Chair Con Bunde. Senators Bettye                                                               
Davis  and  Ralph  Seekins  were  excused.  The  first  order  of                                                               
business to come before the committee was SB 286.                                                                               
SENATOR GARY STEVENS moved to adopt CSSB 286(L&C), version \B,                                                                  
Utermohle. There were no objections and it was so ordered.                                                                      
SENATOR  BERT  STEDMAN,  sponsor,  said  the  Salmon  Task  Force                                                               
inspired SB  286. He said that  the salmon tax was  instituted in                                                               
1913 and  is the oldest tax  in the state. As  the fisheries have                                                               
developed,  the tax  situation has  changed to  keep up  with it.                                                               
Currently, value-added  fish products  have a  5 percent  tax and                                                               
this bill lowers it to  3 percent. Off-shore processors are still                                                               
charged the 5 percent rate; on  shore processors are taxed at the                                                               
3 percent.  The proposed lower tax  applies to vessels of  65 ft.                                                               
or less and is equal to what onshore processors are paying now.                                                                 
Currently, the  valued-added tax  is calculated  at the  point of                                                               
sale. The proposed lower tax would  be calculated on the value of                                                               
the fish as  it comes over the  rail (instead of when  it is sold                                                               
as product).                                                                                                                    
CHAIR  BUNDE asked  him how  that  compared to  fees for  onshore                                                               
SENATOR  STEDMAN   replied  that  onshore  processing   fees  are                                                               
calculated at the same point, when the raw fish is delivered.                                                                   
CHAIR BUNDE asked what fish price  would be used to determine the                                                               
3 percent tax.                                                                                                                  
SENATOR  STEDMAN replied,  "The average  within the  industry for                                                               
that particular fishery."                                                                                                       
CHAIR  BUNDE asked  if  a fisherman  retails  his catch  himself,                                                               
would there  be a  paper trail  of his  transactions. He  noted a                                                               
head in the audience shaking yes.                                                                                               
CHAIR BUNDE  asked how fishermen  report to the state  that their                                                               
taxes are paid.                                                                                                                 
SENATOR  STEDMAN  replied  that numerous  fishermen  sell  [fish]                                                               
product from their boats in  the harbor. Typically, the purchaser                                                               
would be  responsible for paying  the tax, but most  local people                                                               
don't even know about it. This  bill would close that loophole by                                                               
making  the fishermen  responsible for  recording and  collecting                                                               
the tax.                                                                                                                        
CHAIR BUNDE asked  if that would mean when he  drives out to Auke                                                               
Bay and buys a crab off a boat, he would pay the tax.                                                                           
SENATOR  STEDMAN responded  if the  crab had  been processed  and                                                               
Senator Bunde  bought that product,  he would be  responsible for                                                               
paying  the  tax.  Under  this   bill,  the  fishermen  would  be                                                               
SENATOR HOLLIS FRENCH said he was  encouraged to know that SB 286                                                               
is  unanimously   supported  by  the  Joint   Legislative  Salmon                                                               
Industry Task  Force. He  understood it  to be  a tax  break from                                                               
paying 5  percent of  retail value  of fish  product to  paying 3                                                               
percent of wholesale value.                                                                                                     
SENATOR  STEDMAN replied  that is  correct adding  that it  could                                                               
also be  viewed as  a stimulus  to encourage  the industry  to do                                                               
value added  processing. "Hopefully,  it's going to  increase the                                                               
revenue into  the state by  more compliance and  more involvement                                                               
in the value-added processing."                                                                                                 
SENATOR FRENCH  asked if  he could estimate  what percent  of the                                                               
market would be affected.                                                                                                       
SENATOR  STEDMAN  estimated  that  there  would  be  300  to  400                                                               
additional returns.                                                                                                             
SENATOR GARY STEVENS  commented that he served on  the Task Force                                                               
with Senator Stedman  and continually heard about  how the salmon                                                               
industry is in crisis. He related:                                                                                              
     Not only  are the prices  low, the catches are  low and                                                                    
     all of those together are  having an enormous impact on                                                                    
     our  industry. So,  any  time  we can  find  a new  and                                                                    
     innovative   way  to   help  fishermen   become  direct                                                                    
     marketers is probably  for the good. I  realize this is                                                                    
     a  substantial  change  as  you've  indicated,  Senator                                                                    
     French, but we're  in a position where  anything we can                                                                    
     do  to raise  the quality  of our  product, which  this                                                                    
     would do, is very important.                                                                                               
He asked  if fishermen  who chose to  do valued  added processing                                                               
would  come under  the  same  rules as  a  processor,  as far  as                                                               
facility standards.                                                                                                             
SENATOR STEDMAN replied that is his understanding.                                                                              
CHAIR BUNDE  asked if state  officials would have to  inspect the                                                               
fishermen's facilities, which would lead to a fiscal note.                                                                      
SENATOR STEDMAN replied  that is a non issue. He  also added that                                                               
making  the  tax more  user-friendly  encourages  more people  to                                                               
comply with the regulations.                                                                                                    
MS.  SUE  ASPELUND,   Federal  Management  Research  Coordinator,                                                               
Alaska  Department  of  Fish  and Game  (ADF&G),  said  they  are                                                               
extremely excited  about the  positive steps  of the  Salmon Task                                                               
Force to  try to  work on  the direct  marketing issues,  but all                                                               
existing  fish and  game  regulations and  statutes  that are  in                                                               
place will continue to apply  to direct marketers. She emphasized                                                               
that this legislation simply addresses the tax equity issues.                                                                   
She did  not want  to comment on  the committee  substitute until                                                               
she better understood its intention.                                                                                            
CHAIR BUNDE responded  that rather than have  her speculate, this                                                               
bill would have  another hearing next week, which  would give her                                                               
an opportunity to talk to the sponsor.                                                                                          
MS. ASPELUND replied that is fine.                                                                                              
CHAIR BUNDE  said that this  legislation would create 300  to 400                                                               
new processors  and asked  how they  would be  required to  be in                                                               
compliance with  the law. He used  the example of a  deckhand who                                                               
removed the  carapace for him after  he bought a crab  off a boat                                                               
in the  harbor. Currently, removing  the carapace for  a customer                                                               
is technically illegal.                                                                                                         
MS.  ASPELUND   replied  that   issue  concerned   Department  of                                                               
Environmental Conservation (DEC)  regulations. The new processors                                                               
would not be new catcher  sellers within ADF&G's system since the                                                               
department  currently  issues  their   licenses,  but  their  tax                                                               
reporting standards  would be  new to  the Department  of Revenue                                                               
CHAIR BUNDE  wondered if that meant  DEC would have more  work to                                                               
MS.   KATHY   HANSEN,   Executive  Director,   Southeast   Alaska                                                               
Fishermen's Alliance (SEAK), said she  had been trying to improve                                                               
direct marketing regulations  for over eight years and  SB 286 is                                                               
really a  major step. She  said that  300 to 400  catcher sellers                                                               
are currently licensed  under ADF&G and they will  continue to be                                                               
able to do  everything they do now. She explained  that a catcher                                                               
seller  can  only  handle an  unprocessed  product;  they  cannot                                                               
process. The only difference in  the proposed legislation is that                                                               
they will  be liable for paying  the taxes on their  product that                                                               
has been the buyers' responsibility in the past.                                                                                
CHAIR BUNDE questioned  how a troll caught King  salmon is gutted                                                               
and gilled and yet, that isn't processing.                                                                                      
MS. HANSEN replied that one  of the complications in dealing with                                                               
direct  marketing  is  that  the   term  "processing"  has  three                                                               
definitions in statute.  ADF&G, DOR and DEC all  have a different                                                               
definition of processing that meets  their unique needs. A troll-                                                               
dressed King salmon  is not considered processing by  DEC in this                                                               
particular instance.                                                                                                            
She explained that  under state law, a crab  fisherman will never                                                               
be able  to legally remove  a carapace  for a buyer.  DEC statute                                                               
flat out says  he can't. Catcher processors, who  head and freeze                                                               
King salmon  on board their  vessels, currently get  inspected by                                                               
the DEC.  The skipper writes  the fish  ticket and submits  it to                                                               
ADF&G. The value of the fish would be indicated when his year-                                                                  
end revenue returns are done.                                                                                                   
MS.  HANSEN  explained that  two  existing  taxes have  not  been                                                               
getting  paid -  the  hatchery enhancement  tax  (for areas  with                                                               
hatcheries) and  the Alaska Seafood Marketing  Institute (ASMI) 1                                                               
percent marketing tax. The buyer  was responsible for those taxes                                                               
in the  past, but anyone who  walked down the dock  and bought an                                                               
unprocessed  fish  didn't know  about  it  and, therefore,  those                                                               
taxes were just  not collected by the state. This  bill makes the                                                               
catcher sellers  responsible for  paying the  tax. They  will now                                                               
have to fill  out a year-end DOR  form that they have  not had to                                                               
do in the past.                                                                                                                 
MS.  HANSON explained  that an  exporter  is a  person who  sells                                                               
unprocessed product  out of the  state and needs the  DOR Fishery                                                               
Business  Tax License  (for shipping  out of  state) and  the DEC                                                               
license  because of  food  safety issues  during  the process  of                                                               
boxing and shipping.  The exporter already pays 5  percent on the                                                               
higher value product.                                                                                                           
A catcher  processor is a  vessel that  is allowed to  do limited                                                               
on-board processing  - headed  and frozen  product, and,  in some                                                               
cases, dressed.  These businesses  currently have  to pay  tax on                                                               
the price the  salmon is sold for at the  point of sale (possibly                                                               
out of  state), but SB 286  changes their tax to  the lower rate.                                                               
Under this legislation,  they will pay a tax on  the value of the                                                               
salmon when  it is  sold to  the processor, not  at the  point of                                                               
sale of the processed product.                                                                                                  
MS. HANSEN  pointed out  that SB 286  tightens up  enforcement so                                                               
that  product which  has been  significantly undervalued  will be                                                               
taxed at  fair value.  For instance, trollers  might have  used a                                                               
seine  vessel  King  salmon  price   to  value  their  catch,  an                                                               
approximate difference of $1.50  versus 20 cents. That difference                                                               
would  make up  the estimated  expenditures for  the changes  and                                                               
that is why the fiscal note is zero.                                                                                            
CHAIR  BUNDE   wanted  to   make  sure   this  measure   did  not                                                               
legitimatize people who  come to Alaska in their  campers to fish                                                               
and send their catch down south.                                                                                                
MS. HANSEN replied that it wouldn't do that.                                                                                    
SENATOR  STEVENS  said  the  Salmon   Task  Force  heard  from  a                                                               
Dillingham fisherman who had developed  markets in Anchorage, but                                                               
found that  the heads of his  fish, accounting for about  a third                                                               
of  their weight,  couldn't legally  be removed  before shipping.                                                               
Shipping that extra weight made  his plan impractical, but SB 286                                                               
fixes  that.   He  applauded   Ms.  Hansen   for  the   work  her                                                               
organization is doing.                                                                                                          
CHAIR BUNDE said a number of  people had signed up to testify and                                                               
asked Bruce Schactler to present his remarks.                                                                                   
MR. BRUCE SCHACTLER, President,  United Salmon Association (USA),                                                               
thanked  everyone for  the work  they had  done and  supported SB                                                               
286.  As the  market expands  for  value added  product, using  a                                                               
shore-based plant is  the only possible way  fishermen could deal                                                               
with the processing volume.                                                                                                     
MR.  KEN DUCKETT,  Executive  Director,  United Southeast  Alaska                                                               
Gillnetters Association  (USAG), supported  SB 286.  He contended                                                               
     The individual  fisherman needs  the opportunity  to be                                                                    
     able to  market a  portion of his  product in  order to                                                                    
     have  a successful  business  and  the legislation  you                                                                    
     have before you will go a  long ways in helping that to                                                                    
MS. PAGE HERRING, Executive  Director, Cordova District Fishermen                                                               
United  (CDFU),  supported  SB   286.  She  echoed  Ms.  Hansen's                                                               
comments and added:  "Direct marketers are a growing  part of the                                                               
seafood  industry   and  exemplifies  the  can-do   attitudes  of                                                               
Alaska's small businesses."                                                                                                     
MR. ALAN  REEVES, Wrangell fisherman, thanked  everyone for their                                                               
work on this issue. He supported SB 286 fully.                                                                                  
MR.  JIM SMITH,  Wrangell fisherman  supported SB  286 saying  it                                                               
clarified  a lot  of gray  areas  and simplified  things for  the                                                               
MR. BRENNON  EAGLE, Wrangell fisherman,  supported SB  286 saying                                                               
that  he had  been a  successful  direct marketer  of shrimp  for                                                               
about 14  years and  felt that  this bill  would give  the salmon                                                               
industry incentive to start direct marketing, too.                                                                              
CHAIR  BUNDE thanked  everyone for  their testimony  and said  he                                                               
would bring CSSB 286 before the committee again next week.                                                                      
           SB 278-LABOR & WORKFORCE DEVELOPMENT FEES                                                                        
CHAIR CON BUNDE announced SB 278 to be up for consideration.                                                                    
SENATOR GARY  STEVENS moved to  adopt CSSB 278(L&C),  version \D.                                                               
There were no objections and it was so ordered.                                                                                 
COMMISSIONER  GREG O'CLARAY,  Department of  Labor and  Workforce                                                               
Development (DOLWD), explained that in  general terms SB 278 is a                                                               
user fee  bill that offsets  some of  the operating costs  of the                                                               
Division of Labor Standards and  Safety. He deferred questions on                                                               
the  fees  to Mr.  Grey  Mitchell,  Director, Division  of  Labor                                                               
Standards and Safety, but had a  question about what was meant by                                                               
"instructional devices".                                                                                                        
CHAIR BUNDE  responded that  this bill would  be heard  again and                                                               
those questions would be answered then.                                                                                         
MR.  GREY MITCHELL,  Director, Division  of  Labor Standards  and                                                               
Safety,  DOLWD,   said  the  fees  will   help  fund  enforcement                                                               
enhancements  in  the  Mechanical Inspection  Section,  including                                                               
filling a vacant position, and  replace revenue reductions in the                                                               
Wage and Hour Section.                                                                                                          
2:20 p.m.                                                                                                                       
TAPE 04-09, SIDE B                                                                                                            
SENATOR  HOLLIS FRENCH  asked who  inspects ski  tows and  ferris                                                               
wheels now.                                                                                                                     
MR. MITCHELL  replied that amusement  rides are inspected  by the                                                               
Mechanical Inspection Section of  the Division of Labor Standards                                                               
and  Safety.  Currently  all inspections  are  performed  by  one                                                               
person.  He  related  that certifying  inspectors  for  amusement                                                               
rides  is very  expensive and  has to  be done  every two  years.                                                               
Typically, they  are sent to  either California or  Florida where                                                               
there  are a  lot of  amusement rides  - and  this fee  will help                                                               
defray the cost of those trips.                                                                                                 
SENATOR FRENCH asked  how much the state currently  charges to do                                                               
the inspections.                                                                                                                
MR. MITCHELL replied that right now there is no fee.                                                                            
SENATOR FRENCH asked him to explain what a boiler operator does.                                                                
MR. MITCHELL  answered that  they are  licensed to  do particular                                                               
types  of work  on  particular  types of  boilers.  The State  of                                                               
Alaska has  four different classes  of boiler  operator licenses.                                                               
In  SB 278,  AS 18.60.395  requires them  to be  licensed by  the                                                               
DOLWD.  Currently, there  is  no  fee nor  is  there a  statutory                                                               
requirement for anyone to have the license.                                                                                     
SENATOR FRENCH asked  if inspectors are now going  to be required                                                               
to have  a license and  that they would have  to pay $200  to get                                                               
MR. MITCHELL  defended his position  saying the  statute requires                                                               
the DOLWD to provide a  license. Historically, the department has                                                               
not  required   licensing,  but  some  employers   and  different                                                               
insurance companies  want to have  the people who are  working on                                                               
boilers in their facilities to be licensed.                                                                                     
     That is what  we're dealing with. It's  not a statutory                                                                    
     requirement and we don't propose  to have one, but if a                                                                    
     person does want to come  out and get licensed, we want                                                                    
     to charge them a fee for it.                                                                                               
CHAIR BUNDE commented that the  policy for getting a beautician's                                                               
license was  revenue neutral  and maybe this  is a  reflection of                                                               
SENATOR FRENCH asked whom exactly this would cover.                                                                             
MR. MITCHELL replied  that it would apply to the  group of people                                                               
who  currently  have licenses,  but  not  everyone who  works  on                                                               
boilers in  general. Probably individuals  working on  the larger                                                               
boilers would  fit the  bill the  best. Alaska  has approximately                                                               
978  individuals  who have  boiler  operator's  licenses, but  he                                                               
didn't  know  how many  are  currently  working. There  were  300                                                               
renewals last year, which is  the figure the department based its                                                               
estimate on.                                                                                                                    
CHAIR BUNDE  asked if, in  the past, the department  has licensed                                                               
boiler operators as  a courtesy for some employers,  but now they                                                               
will charge a fee for the licensing.                                                                                            
MR. MITCHELL said that is correct.                                                                                              
CHAIR BUNDE asked  if the voluntary flex work  hour plan (section                                                               
4) meant that  an employee would work four-tens  instead of five-                                                               
eights or something like that.                                                                                                  
MR. MITCHELL replied that is correct.                                                                                           
CHAIR BUNDE  asked if the  state requires  a flex schedule  to be                                                               
filed with the DOLWD.                                                                                                           
MR. MITCHELL replied yes, because  by statute flex schedules must                                                               
be exempted from overtime.                                                                                                      
CHAIR BUNDE  asked him to  expand on the building  safety account                                                               
in section 6.                                                                                                                   
MR. MITCHELL explained  that the building safety  account was put                                                               
into  place last  year  and is  basically a  way  to provide  the                                                               
Mechanical  Inspection  Section  some accountability.  Section  6                                                               
directs  the fees  that are  charged  by that  section into  that                                                               
account and inspection services are paid out of it.                                                                             
SENATOR  FRENCH  asked  how  many  people  he  thought  would  be                                                               
affected  by   section  3  that   deals  with   applications  and                                                               
examination fees for journeymen and trainees.                                                                                   
MR.  MITCHELL replied  that section  would affect  3,300 plumbers                                                               
and electricians  - about 60  percent in the  electrical category                                                               
and about 40 percent in the plumber category.                                                                                   
SENATOR FRENCH asked  how the revenue neutral  concept applies to                                                               
this category and what is the reason behind increasing the fees.                                                                
MR. MITCHELL replied  that the department has come up  short in a                                                               
few  areas  in the  Mechanical  Inspection  Section due  to  cost                                                               
increases.  As a  result, an  electrical  inspector position  has                                                               
been  left vacant.  The fees  would first  be used  to fill  that                                                               
position and then another position  would be added. Currently, he                                                               
declared, only one inspector covers the entire State of Alaska.                                                                 
SENATOR STEVENS asked why the state  needs to know if an employer                                                               
has a flexible work schedule plan (regarding section 4).                                                                        
COMMISSIONER O'CLARAY  replied that  Alaska's basic  overtime law                                                               
requires the department  to approve any change  in the eight-hour                                                               
day  work schedule.  Over 240  exemptions were  filed last  year.                                                               
History has  shown that many  employers try to take  advantage of                                                               
employees and that's why laws like this are on the books.                                                                       
SENATOR STEVENS asked  if all employers who want  a flexible work                                                               
plan must file through this system.                                                                                             
COMMISSIONER O'CLARAY answered that is correct.                                                                                 
CHAIR BUNDE said they  would set SB 278 aside and  hear it in the                                                               
near future.                                                                                                                    
             SB 254-TOURISM & RECREATION ASSESSMENT                                                                         
CHAIR CON BUNDE announced SB 254 to be up for consideration.                                                                    
MR. JOE BALASH, Staff to Senator Therriault, sponsor, said:                                                                     
     SB 254 is  an effort to generate and  identify a source                                                                    
     of funding  for cooperative marketing for  the State of                                                                    
     Alaska.  For  years,  the  tourism  industry  has  been                                                                    
     asking  for  an  increase  in  state  marketing  money.                                                                    
     However, due to  the lack of general  fund dollars, the                                                                    
     Legislature, as  a general rule, has  been reluctant to                                                                    
     provide  those dollars  unless the  industry identifies                                                                    
     some means to pay for that effort.                                                                                         
This  legislation was  developed  at the  request  of the  Alaska                                                               
Travel  Industry  Association (ATIA)  and  is  intended to  be  a                                                               
fairly broad based  tax within the tourism  industry, intended to                                                               
affect  tourists and  only affecting  residents when  they behave                                                               
like a tourist. Surveys conducted  by the state and industry show                                                               
that non-cruise  visitors to the  state have been  declining over                                                               
the past couple of years and  the businesses that depend on those                                                               
numbers are suffering as a result.                                                                                              
MR. BALASH  noted a proposed  committee substitute, but  he hoped                                                               
to  have a  better  one available  by next  week.  He offered  to                                                               
answer questions.                                                                                                               
CHAIR BUNDE  asked committee members  to not deal  with specifics                                                               
since a  committee substitute  was being  prepared. He  asked Mr.                                                               
Balash to address the dedicated funds issue.                                                                                    
MR.  BALASH responded  that generated  funds  would be  deposited                                                               
into a sub-account in the  general fund, although the Legislature                                                               
is not bound  to appropriate the funds for the  purpose stated in                                                               
the bill.                                                                                                                       
SENATOR GARY  STEVENS asked how  the money would be  spent. Would                                                               
it go to an association or a board?                                                                                             
MR. BALASH replied:                                                                                                             
     Under  current   statute,  the  state  enters   into  a                                                                    
     marketing contract with  a qualified trade association.                                                                    
     In this  instance, that is  the Alaska  Travel Industry                                                                    
     Association.   That   contractual   relationship   will                                                                    
     continue. Whatever  funds the  Legislature appropriates                                                                    
     for marketing  would be appropriated to  the Department                                                                    
     of Community  and Economic Development for  the purpose                                                                    
     of  entering   into  a  contract  under   the  existing                                                                    
     statutes for that purpose.                                                                                                 
SENATOR STEVENS  asked if  industry had any  oversight as  to how                                                               
the money is spent.                                                                                                             
MR. BALASH  replied that statutes  governing the  qualified trade                                                               
association  say  that expenditures  must  be  broadly based  and                                                               
representative  of the  industry  within the  state. The  current                                                               
board of directors for the association does that quite well.                                                                    
SENATOR HOLLIS  FRENCH said this  is essentially a 2  percent tax                                                               
that will be added on to the bill a tourist will pay.                                                                           
MR. BALASH replied that is  essentially correct and the committee                                                               
substitute will identify which activities  the assessment will be                                                               
collected  from.  The  legislation  calls  this  the  Sustainable                                                               
Tourism and Recreation  Assessment Act and it  is recognized that                                                               
some of the activities are going  to be conducted by residents of                                                               
the state. The ATIA is  charged with developing instate marketing                                                               
- to  get people from  the Interior to  come to Anchorage  and to                                                               
get people from Anchorage to go to the Kenai, etc.                                                                              
SENATOR  FRENCH asked  if this  leaves the  cruise ship  industry                                                               
MR. BALASH  replied that  is correct  and added  that it  is very                                                               
difficult   to  assess   intrastate  transportation   activities.                                                               
Airline  passengers, for  instance, can't  be charged  for flying                                                               
over a state.                                                                                                                   
MR.  RON  PECK, President  and  Chief  Operating Officer,  Alaska                                                               
Travel  Industry Association  (ATIA), supported  SB 254.  He said                                                               
that Alaska needs  to double its marketing budget  to $20 million                                                               
and have a strong presence in the marketplace.                                                                                  
He said that tourism  is down to flat in most  of Alaska and that                                                               
independent travel has  decreased for the past  two years. Border                                                               
crossings have decreased by 8  percent from 120,000 passengers to                                                               
109,000 and  airport arrivals  and departures  at the  four major                                                               
airports have  decreased by 3.5  percent (115,000  passengers) in                                                               
the summer.  The Legislature  has asked  ATIA to  come up  with a                                                               
plan for more funding and  SB 254 identifies the funding sources.                                                               
The  sources are  broad based  and  impact a  variety of  tourism                                                               
industry   sectors  including   tourism-related  activities   and                                                               
attractions. It does not ask for increased general funds.                                                                       
MR. PECK  explained that the assessments  in SB 254 are  based on                                                               
the Alaska  Seafood Marketing Institute  (ASMI) model,  which has                                                               
previously  been  adopted  by   the  Legislature.  Adopting  this                                                               
assessment is a good business  decision and a good investment for                                                               
state  tourism.  Federal statutes  do  not  allow assessments  to                                                               
apply  to transportation  via air  or cruise  ship, but  ATIA has                                                               
estimated that over  40 percent of the  activities being assessed                                                               
are attributable to the cruise ship passengers.                                                                                 
MS. BETTYE ADAMS,  owner, Alaskan Hotel and Bar,  opposed SB 254.                                                               
She declared:                                                                                                                   
     It would be harmful to  my business, because the cruise                                                                    
     ships are just  floating hotels. They are  not going to                                                                    
     have a  tax placed on  them; I already have  12 percent                                                                    
     on me. This is going to  be 14 [percent] and who knows,                                                                    
     some  more might  be put.  If  you do  pass it,  please                                                                    
     exempt  hotels  so  that it  makes  the  playing  field                                                                    
MS. ADAMS said  there is no guarantee that any  of the assessment                                                               
would be used to advertise  for small independent businesses like                                                               
hers  and  cruise  ships  are already  spending  $70  million  on                                                               
advertising. Further, she asserted:                                                                                             
     I do not believe that it  is a lack of advertising that                                                                    
     is  causing our  decline.  I think  it  is because  the                                                                    
     cruise  ships are  up 9  percent and  we're down....  I                                                                    
     think cruise ships are our  competition and are sucking                                                                    
     our business  over because they  are a better  deal. We                                                                    
     can't compete with them fairly.                                                                                            
     My   second   point   is  I   don't   believe   it   is                                                                    
     constitutional. I got  this memorandum from Legislative                                                                    
     Services. It was asked for  by [Senator] Ben Stevens on                                                                    
     November 18, 2003 on the  model they are forming, which                                                                    
     is the ASMI model.                                                                                                         
MS.  ADAMS explained  that the  memo makes  two points  about why                                                               
this type of assessment is  unconstitutional and that, "The power                                                               
of taxation shall never be surrendered."                                                                                        
Assessment is just  another word for taxes imposed  by the state,                                                               
she said, and  the memo indicated it might  constitute an invalid                                                               
delegation  of   the  Legislature's  taxing  powers.   Under  the                                                               
Constitution,  you  can  only  delegate  taxing  authority  to  a                                                               
borough  or city.  The  Alaska  Supreme Court  in  State v.  Alex                                                               
(1982) says  that the Legislature  did not have the  authority to                                                               
authorize  regional associations  to  approve  or disapprove  the                                                               
imposition of assessments.                                                                                                      
MS. ADAMS  said the dedicated  funds issue applies in  this case.                                                               
The memo from Legal and  Research Services Division said that the                                                               
use of  the phrase "may  be appropriated  back", which is  in the                                                               
     Potentially misleads  constituents to believe  that the                                                                    
     money  from the  taxes  and assessments  that they  pay                                                                    
     will be  used only for certain  purposes. Therefore, it                                                                    
     creates  a   moral  obligation  on  the   part  of  the                                                                    
     legislators to  appropriate the money for  the specific                                                                    
     purpose, which may, in  effect, violate the prohibition                                                                    
     against dedicated funds.                                                                                                   
MS. ADAMS  also remarked that she  is an ATIA member  and was not                                                               
ever asked if she approved  of the assessment, which was approved                                                               
at a  convention, which she  and a lot  of other members  did not                                                               
MR. CHIP THOMA,  Juneau resident, said that  tourism taxation has                                                               
been  very successful  for  the last  five  years, especially  in                                                               
Southeast Alaska. He remarked:                                                                                                  
     There has  been a  dramatic increase  in the  number of                                                                    
     passengers traveling  on the  largest of  cruise ships.                                                                    
     What was recently projected as  a 9 percent increase in                                                                    
     passenger  numbers for  2004  was actually  a  15 -  20                                                                    
     percent  increase just  a few  years ago.  Soon, as  we                                                                    
     reach 1 million  passengers coming into this  town, a 5                                                                    
     percent  increase will  be huge  and this  occurs on  a                                                                    
     yearly basis.                                                                                                              
MR. THOMA  related how Juneau  voters authorized a  $5 individual                                                               
passenger fee  that helped  upgrade downtown  Juneau. The  use of                                                               
the  fee for  these capital  improvements on  the waterfront  has                                                               
been a  huge success  for residents,  businesses and  the 800,000                                                               
cruise ship tourists who visit here. However, he said:                                                                          
     I respectfully  disagreed with SB  254 that there  is a                                                                    
     need  to further  market tourism  to Southeast  Alaska.                                                                    
     Summer  tourism here  is not  wild  Alaska salmon.  The                                                                    
     state does not  need to help sell the  product. The big                                                                    
     tour  companies,  cruise   lines,  airlines  and  local                                                                    
     visitor bureaus already promote  travel here on a daily                                                                    
     basis  -  and  newspapers,  magazines  and  commercials                                                                    
     nationwide. The  individual passenger fee on  the other                                                                    
     hand,  also  known as  the  cruise  ship head  tax,  is                                                                    
     passed  on directly  to the  passenger,  just like  the                                                                    
     surtax  for an  airport rental  car. No  one complains,                                                                    
     it's easy to collect and easy to explain...                                                                                
     However, SB 254, a statewide  sales tax on local Alaska                                                                    
     businesses   to  pay   for  generic   come-visit-Alaska                                                                    
     advertising,  does  not  address  the  local  needs  to                                                                    
     provide clean,  safe and beautiful waterfronts  for all                                                                    
     these  folks to  visit.  I urge  you  to reexamine  the                                                                    
     purposes of  this assessment  in the  bill, as  well as                                                                    
     the  target tax  group  of local  mom  and pop  tourist                                                                    
MR.  SCOTT REISLAND,  campground owner  at Denali  National Park,                                                               
said  four  generations   of  his  family  have   worked  at  his                                                               
campground and  he supported  SB 254.  He felt  that it  was very                                                               
important to  have marketing  dollars to  help bring  people into                                                               
the  state.  The Alaska  Campground  Association  polled all  the                                                               
small  campgrounds over  the state  and found  that numbers  were                                                               
down  17 percent  for the  last three  years. He  felt this  bill                                                               
would help  many small  businesses throughout  Alaska, especially                                                               
in the Interior.                                                                                                                
MR. DALE  FOX, Alaska's Best Birdy,  said that tourism is  on the                                                               
decline in Alaska except for the  cruise ship market. He said his                                                               
business  failed  as  a  direct  result  of  not  getting  enough                                                               
independent visitors.  He said that Alaska  is 39  in  the nation                                                               
in terms of  dollars spent for marketing. "We've  got a long-haul                                                               
destination,  an expensive  destination  and we  need  to be  out                                                               
there in the marketplace."                                                                                                      
MR. FOX said he found another  job, but he had five employees who                                                               
are  now out  of work  because his  business didn't  make it.  He                                                               
     This bill is  the right vehicle; there is  some work to                                                                    
     be  done   in  terms  of   some  of  the   wording  and                                                                    
     definitions,  but  it  is the  answer  for  independent                                                                    
     businesses all over the Interior....                                                                                       
MR. ALAN LEMASTER,  Gakona resident, said in  the mid-80s, Alaska                                                               
had a good marketing technique and had the money to do it with.                                                                 
     We  became  leaders  in  the  world.  We  were  gaining                                                                    
     visitors at the rate of 10,  11, and 12 percent a year.                                                                    
     Then the  dollars started to go  away.... The marketing                                                                    
     went down and  so did the customers....  Until the last                                                                    
     three  or  four years,  instead  of  gains, we've  seen                                                                    
     losses in  the number  of visitors.  My business  is in                                                                    
     rural Alaska and I am  very much affected by what comes                                                                    
     across the Canadian border....                                                                                             
TAPE 04-10, SIDE A                                                                                                            
MR. LEMASTER concluded  that there was no doubt in  his mind that                                                               
ATIA would  raise to the  challenge with additional  funding. His                                                               
concern was that $20 million might not be enough.                                                                               
MR.  JOHN KREILKAMP,  Vice  President,  Operations, Cruise  West,                                                               
said  his company  has been  doing  things a  bit differently  in                                                               
Alaska in  terms of  cruising with seven  small ships  plying the                                                               
inside  passage visiting  small  communities, as  well as  larger                                                               
ones.  He said  they have  experienced  a 15  percent decline  in                                                               
business in the last two years and  he has had to lay people off.                                                               
He lamented:                                                                                                                    
     Much of this  is because we are not  in the marketplace                                                                    
     in terms  of being competitive with  other destinations                                                                    
     whether they  are communities, states  or international                                                                    
     destinations. Cruise  West benefits from the  fact that                                                                    
     there [are] marketing dollars out there....                                                                                
MR. KREILKAMP concluded by saying that he supports SB 254.                                                                      
MS.  PAM LABOLLE,  President, Alaska  State Chamber  of Commerce,                                                               
said that  everyone is aware  that visitation to Alaska  has been                                                               
diminishing because  it is not  competitive in the  world tourism                                                               
marketplace.  She applauded  the  industry for  taking this  bold                                                               
step to assess itself and supported SB 254.                                                                                     
CHAIR BUNDE thanked everyone for  their testimony and said SB 254                                                               
would be held  for further work. There being  no further business                                                               
to come  before the committee,  he adjourned the meeting  at 3:15                                                               

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