02/23/2021 10:00 AM House FISHERIES

          HB 80-SPT FSH HATCHERY FACIL ACCT; SURCHARGE                                                                      
                                                                                                                                
11:46:03 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES announced that the  final order of business would be                                                               
HOUSE  BILL  NO.  80  "An  Act  establishing  the  sport  fishing                                                               
hatchery  facilities  account;  establishing  the  sport  fishing                                                               
facility surcharge; and providing for an effective date."                                                                       
                                                                                                                                
11:46:17 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES made introductory remarks on  HB 80 on behalf of the                                                               
prime sponsor  [House Rules by  request of the  governor], noting                                                               
that the bill  is the Alaska Department of Fish  & Game (ADF&G's)                                                               
top  legislative  priority and  had  been  introduced during  the                                                               
previous legislative session and was  not passed due to COVID-19.                                                               
She  stated that,  because the  bill  did not  pass the  previous                                                               
session, the  sport fishing hatchery  surcharge had  been allowed                                                               
to sunset  and millions of  dollars of revenue was  not collected                                                               
by the department.  She urged quick action by the committee.                                                                    
                                                                                                                                
11:47:07 AM                                                                                                                   
                                                                                                                                
DAVID RUTZ,  Director, Division of Sport  Fish, Alaska Department                                                               
of Fish & Game,  stated that HB 80 is a  governor's bill that the                                                               
Department  supports,   and  it   is  one  of   the  department's                                                               
legislative priorities  this session.   He reviewed that  in 2005                                                               
the legislature  approved a bond  measure to construct  two sport                                                               
fish hatcheries:  the William  Jack Hernandez Sport Fish Hatchery                                                               
in  Anchorage  and  the  Ruth  Burnett  Sport  Fish  Hatchery  in                                                               
Fairbanks.    In order  to  receive  the  bond, ADF&G  crafted  a                                                               
repayment plan that was unprecedented.   A surcharge was added to                                                               
sport  fishing licenses,  nearly all  of which  went directly  to                                                               
repayment  of  the  bond,  less  $500  thousand,  which  went  to                                                               
Southeast  Alaska annually  for hatchery  production, since  this                                                               
area was  not serviced by  the two  bonded hatcheries.   He noted                                                               
that fishermen  paid the  surcharge without  much complaint.   No                                                               
general  fund dollars  were used  to  pay back  the bonds;  sport                                                               
angler  dollars matched  by federal  [Dingle-Johnson funds]  paid                                                               
the bill.   The combined  enhancement program that  the surcharge                                                               
funded contributes  approximately $50  million to the  economy of                                                               
the state.   This unique plan worked so well  that the department                                                               
paid this bond back five years  early, in calendar year 2020.  As                                                               
a result, the surcharge and  all associated statutes sunsetted on                                                               
December 31, 2020.                                                                                                              
                                                                                                                                
MR. RUTZ relayed that upon the  repayment of bond debt, there was                                                               
an  immediate $500  thousand funding  impact to  Southeast Alaska                                                               
from loss  of the surcharge  income, which funds the  raising and                                                               
releasing  of over  1.4 million  Chinook salmon  and hundreds  of                                                               
thousands  of coho  salmon  smolt at  release  sites targeted  to                                                               
benefit sport anglers  in Southeast inside waters.   He explained                                                               
that   losing  this   level  of   funding  to   support  existing                                                               
enhancement activities  is detrimental to Southeast  Alaska sport                                                               
anglers  and charter  operators  already highly  impacted by  the                                                               
lack   of  out-of-state   travelers   due   to  COVID-19   travel                                                               
restrictions.                                                                                                                   
                                                                                                                                
MR.  RUTZ directed  attention to  a  fact sheet  included in  the                                                               
committee  packet,  which  shows  that  the  overall  sport  fish                                                               
enhancement program releases nearly  7.2 million fish into nearly                                                               
270 locations  statewide annually,  which is  in addition  to the                                                               
1.4 million in  Southeast and provides thousands  of anglers with                                                               
additional  fishing opportunities,  as well  as provides  a large                                                               
economic boost to Southeast businesses.                                                                                         
                                                                                                                                
MR.  RUTZ  said that  when  the  Ruth  Burnett and  William  Jack                                                               
Hernandez Sport  Fish Hatcheries  came online, nearly  $5 million                                                               
of Dingell-Johnson  funds had  to be redirected  in order  to pay                                                               
for their  operations and  maintenance.   Any needed  repairs and                                                               
maintenance  to date  have come  from  existing operating  budget                                                               
funds  and  usually  have  been  done at  the  expense  of  other                                                               
division needs.   He  said there have  been several  larger, more                                                               
expensive needs  that were deferred during  construction and have                                                               
yet to  be addressed.  He  cautioned that as the  facilities age,                                                               
the maintenance  needs will grow,  which will likely  put further                                                               
undue burden onto existing programs.   He advised that having the                                                               
ability to tap into a source  of funds to cover these needs would                                                               
allow  the  division  to  sustain  existing  enhanced  production                                                               
without [negative] impacts elsewhere.                                                                                           
                                                                                                                                
11:51:31 AM                                                                                                                   
                                                                                                                                
MR.  RUTZ said  that with  these ongoing  maintenance obligations                                                               
and the loss of a substantial  amount of revenue to support sport                                                               
fish enhancement in Southeast Alaska,  the department worked with                                                               
groups  across  Alaska to  propose  a  new  plan to  reinstate  a                                                               
reduced surcharge.  The reduction  to the previously collected $9                                                               
surcharge was $5  across the board.  He explained  that this left                                                               
residents with  a $4 surcharge and  nonresidents contributing the                                                               
lion's  share,  over  6  times  what  residents  contribute.  The                                                               
proposed surcharge  is a 60  percent reduction for  residents and                                                               
overall a  34 percent decrease  from the original  surcharge fee.                                                               
He  added that  "this surcharge  has been  in place  for about  a                                                               
decade and  a half."  He  noted that a license  fee breakdown was                                                               
available in the committee packet.                                                                                              
                                                                                                                                
MR. RUTZ stated,  "The department proposes again  to collect that                                                               
surcharge and  deposit it into  a separate subaccount  within the                                                               
fish and  game fund  to be  accounted for and  used only  for the                                                               
maintenance and  operations of the state's  sport fish hatcheries                                                               
sport fish enhancement in Southeast  Alaska."  He said there was,                                                               
on  average, $6.4  million generated  in  revenue from  surcharge                                                               
collections on sport  fish licenses.  The  reduction in surcharge                                                               
would  net the  division  approximately $4  million per  calendar                                                               
year.   The   division   currently  allocates   $7   million   to                                                               
enhancement-related  activity projects,  with  most  tied to  the                                                               
operation and maintenance of the  2 large facilities in Fairbanks                                                               
and Anchorage.                                                                                                                  
                                                                                                                                
MR. RUTZ concluded his remarks  by stating that the establishment                                                               
of this  new reduced  enhancement surcharge  would cover  most of                                                               
the  existing costs  allocated toward  the enhancement  programs.                                                               
Further,  it would  address  deferred  equipment and  maintenance                                                               
needs and  ensure contingency funds are  available for unforeseen                                                               
events   at   these   facilities  without   having   to   request                                                               
supplemental  funds from  the legislature  or,  worst case,  shut                                                               
down the facilities.   He noted that this  legislation, through a                                                               
previous bill,  had been introduced  in 2019, to be  heard during                                                               
the Thirty-First Alaska State Legislature,  but with the pandemic                                                               
in full swing unfortunately was not meant to be.                                                                                
                                                                                                                                
11:55:50 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES stated that the  surcharge had been in existence for                                                               
some time  prior to the  sunset, and the department  is currently                                                               
requesting only  a portion of  the surcharge be reinstated.   She                                                               
postulated that  if the entire  surcharge were to  be reinstated,                                                               
then  the department  would collect  an estimated  $2 million  in                                                               
additional revenue  than the  current proposed  legislation would                                                               
provide.   She added  that the  department has  well-known budget                                                               
shortages, and that  82 percent of the revenue  is collected from                                                               
nonresident anglers.   She  asked the  department to  explain why                                                               
only a portion of the surcharge is requested to be reinstated.                                                                  
                                                                                                                                
MR. RUTZ explained that in  2005, the department had conveyed its                                                               
intention that the  surcharge would be eliminated  once the bonds                                                               
had been fully repaid.  He  stated his intention on behalf of the                                                               
department  that it  should not  appear [to  the industry]  to be                                                               
greedy.                                                                                                                         
                                                                                                                                
11:57:51 AM                                                                                                                   
                                                                                                                                
CHAIR  STUTES stated  that things  have changed  since 2005  and,                                                               
during   the   previous   legislative   session,   the   proposed                                                               
legislation had  been amended to include  additional surcharge to                                                               
be collected.   She  expressed her  concern that  HB 80  does not                                                               
request sufficient revenue to cover the program.                                                                                
                                                                                                                                
11:58:41 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  MCCABE  stated  his   support  for  the  hatchery                                                               
program  and  requested  that  the   department  provide  a  cost                                                               
breakdown  by facility  for deferred  maintenance  that had  been                                                               
referred to in testimony.                                                                                                       
                                                                                                                                
11:59:50 AM                                                                                                                   
                                                                                                                                
MR. RUTZ directed  attention to a cost breakdown  included in the                                                               
committee  packet.   He estimated  that $5  million of  sportfish                                                               
funds had  been spent on the  program, with $3.4 million  for the                                                               
William  Jack  Hatchery  and  $2 million  for  the  Ruth  Barnett                                                               
Hatchery.  He  stated that cost overruns  during the construction                                                               
of  the hatcheries  had resulted  in incomplete  construction and                                                               
deferred  costs.   He  gave examples  of  maintenance items  that                                                               
included wells,  disinfection units  for production  modules, new                                                               
trucks, and completion of visitor center facilities.                                                                            
                                                                                                                                
12:01:56 PM                                                                                                                   
                                                                                                                                
CHAIR  STUTES pointed  out that  the  committee packet  contained                                                               
itemized costs for projects and  requested the department provide                                                               
a cost estimate breakdown by facility.                                                                                          
                                                                                                                                
MR.  RUTZ agreed  to  provide the  requested  information to  the                                                               
committee.                                                                                                                      
                                                                                                                                
12:02:38 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  STORY  asked  for  the department  to  provide  a                                                               
formula or  revenue analysis depicting how  the surcharge revenue                                                               
proposed  would  be  allocated according  to  the  facility  cost                                                               
breakdown that the  department had agreed to provide.   She asked                                                               
for the department to also provide a breakdown of economic                                                                      
development and impact to the state from the hatchery program.                                                                  
                                                                                                                                
12:03:16 PM                                                                                                                   
                                                                                                                                
CHAIR STUTES stated her intention to offer a future committee                                                                   
substitute to HB 80.                                                                                                            
                                                                                                                                
CHAIR STUTES announced HB 80 was held over.