Legislature(2025 - 2026)BUTROVICH 205
03/31/2025 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Fisheries Task Force Report | |
| SB130 | |
| SB135 | |
| HJR11 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HJR 11 | TELECONFERENCED | |
| *+ | SB 130 | TELECONFERENCED | |
| *+ | SB 135 | TELECONFERENCED | |
SB 135-REFUND OF FISH BUSINESS TAX TO MUNIS
4:03:30 PM
CHAIR GIESSEL announced the consideration of SENATE BILL NO. 135
"An Act relating to the sharing of tax revenue from the
fisheries business tax and fishery resource landing tax with
municipalities; relating to municipal reports on the shared tax
revenue; and providing for an effective date."
4:03:52 PM
TIM LAMKIN, Staff, Senator Gary Stevens, Alaska State
Legislature, Juneau, Alaska, said SB 135 is inspired by and
modeled after legislation that was introduced in 2012 and
relates to fisheries tax revenue sharing. He briefly discussed
the history of fisheries tax revenue sharing and explained that
the revenue split was originally 10/90 (with ten percent going
to local municipalities). He said the revenue sharing is
intended to support fisheries-related activities in coastal
communities (e.g. canneries). He stated the revenue share for
municipalities has increased twice, in 1979 (an increase to 20
percent) and in 1981 (an increase to the current share of 50
percent). He shared his understanding that municipalities
typically receive 50 percent in the form of a refund. He said
the fisheries business tax and the fisheries landing resource
tax are shared between municipalities and the State of Alaska.
In general, SB 135 would shift the split from 50/50 to 60/40
(with 60 percent going to municipalities). He emphasized that SB
135 does not change the tax level or the fisheries policies. He
said the intention of SB 135 is to begin discussions and there
is room for change. He pointed out that Joint Legislative Task
Force Evaluating Alaska's Seafood Industry (ASTF) considered
shifting the revenue so that municipalities received 100
percent. He surmised that the Senate Finance Committee would
discuss the fiscal impact at length. He noted that
representatives from the Department of Revenue and the Alaska
Municipal League (AML) would provide additional testimony.
4:06:54 PM
SENATOR HUGHES referred to page 2, paragraph 3 of the fiscal
note from the Department of Revenue (DOR), OMB Component Number
2476, dated March 28, 2025. She pointed out that, according to
the fiscal note, the revenue split between municipalities and
the state would range from 60-75 percent, depending on tax type
and processing location. She acknowledged that coastal
communities are struggling and indicated concern about
potentially decreasing the State of Alaska's revenue amounts.
She asked for additional information about range in the revenue
split.
4:07:28 PM
MR. LAMKIN replied that reading SB 135 and the sectional
analysis would be the most helpful way to understand those
changes. He explained that the split changes depending on
whether the local government falls withing a qualified
municipality, is an unorganized borough, etc. He said that he
did not do in-depth historical research on the origin of the
policies; however, he surmised that the politics of that time
impacted the structure of the current statute.
4:08:18 PM
CHAIR GIESSEL said that Department of Revenue (DOR) and
Department of Commerce, Community and Economic Development
(DCCED) representatives were available to answer questions.
4:08:37 PM
SENATOR HUGHES noted that it is a complicated issue and asked
whether DOR could speak to the potential revenue impact this
change would have on the State of Alaska.
4:08:49 PM
CHAIR GIESSEL pointed out that there was a fiscal note and
invited Mr. Spanos to provide additional information.
4:08:58 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue (DOR), Anchorage, Alaska, said that the current
structure of the revenue share is simpler than the language in
SB 135. He expressed uncertainty regarding whether this was
intentional. He said the changes to the fisheries business tax -
including the 60-75 percent split - are different than the
fisheries development tax. He suggested that this may have been
an oversight. He explained that, currently, the statute includes
a 50/50 split for revenue sharing and said that, if the
intention is to create a 60/40 split, DOR could suggest amended
language options to achieve that goal. He explained that,
generally, this would give 30 percent each to the city and the
borough (if the city is in an organized borough), and the state
would receive 40 percent.
MR. SPANOS shared his understanding that, as currently written,
every case results in a 75/25 percent split. He explained that
75 percent would either go directly to local communities or to
the Department of Commerce, Community and Economic Development
(DCCED) to be shared out with local communities. He expressed
uncertainty with the allocation program of DCCED and surmised
that it is different from the way DOR would distribute the
revenue share. He referred to the fiscal note from the
Department of Revenue (DOR), OMB Component Number 2476, dated
March 28, 2025, and explained that the fiscal note assumes a
75/25 percent split. He said that in fiscal year (FY) 2026, this
would result in a negative budget impact of $12.3 million. He
said that amount would be appropriated in the current budget
year but would not be paid out until the following budget year.
In FY2031, there would be a negative budget impact of $16.8
million.
4:11:10 PM
SENATOR MYERS observed that SB 135 includes a stair step method
for new cities created within a borough but does not address new
boroughs created to encompass a city. He offered a hypothetical
example and asked if this also needs to be addressed.
4:11:49 PM
MR. LAMKIN deferred the question.
4:12:03 PM
MR. SPANOS expressed uncertainty. He said the stair step method
is in current statute and SB 135 would change the amount
communities receive, depending on how long each has been
incorporated. He deferred the question.
4:12:30 PM
CHRIS BECKER, Lead Auditor, Tax Division, Department of Revenue
(DOR), Anchorage, Alaska, said current statute does not address
new boroughs formed around cities.
4:12:51 PM
SENATOR MYERS observed that the impetus for the fisheries tax
revenue sharing is related to harbor maintenance. He noted that
those facilities were previously owned by the State of Alaska.
He pointed out that, according to the sponsor statement for SB
135, if municipalities are unable to maintain harbor facilities,
the harbor facility titles revert to the State of Alaska. He
asked whether any municipalities have requested to return harbor
ownership to the State of Alaska rather than making changes to
the revenue sharing structure.
4:13:43 PM
SENATOR STEVENS replied that he is not aware of any
municipalities making that request.
SENATOR MYERS wondered if this should be considered in the place
of changing the fisheries tax revenue sharing.
4:13:55 PM
SENATOR STEVENS replied that ASTF heard from many communities
that were highly impacted by the industry downturn. He noted
that some communities have lost their processors and there is no
way for the State of Alaska to help them. However, for other
small communities where processors remain, a small amount of
assistance would be highly impactful. He opined that some
communities have not yet realized the impact the industry
downturn will have. He said SB 135 is an attempt to help fishing
communities during a difficult time and added that the funds are
not limited to harbor maintenance.
4:14:55 PM
SENATOR KAWASAKI shared his understanding that the intention was
for municipalities to use the funds from revenue sharing on
related infrastructure improvements. He asked if this is how
municipalities ultimately used the revenues.
4:15:46 PM
MR. SPANOS asked to hear the question again.
4:15:51 PM
SENATOR KAWASAKI said the intent is for the money collected from
the landing tax to be distributed to communities that have
related ports, and for those communities to use the funds for
port maintenance and related infrastructure. He asked if DOR is
aware of how the money is spent or whether it is rolled into the
municipality's general fund.
4:16:27 PM
MR. SPANOS shared his understanding that current statute does
not specify that communities must spend the funds from revenue
sharing on fisheries infrastructure. He surmised that the
revenue is deposited into the municipality's general fund.
4:16:52 PM
MR. LAMKIN directed attention to SB 135, Section 8, page 4, and
said this would require municipalities to begin reporting how
they are spending monies from the fisheries business tax. He
then directed attention to SB 135, Section 15, page 8, which
contains a similar reporting requirement for the landing tax
fisheries monies.
4:17:27 PM
CHAIR GIESSEL noted that Alaska Municipal League (AML) would
also provide testimony on SB 135.
4:17:40 PM
SENATOR DUNBAR expressed interest in seeing what the reporting
requirement reveals and whether municipalities are spending the
funds on harbor maintenance. He argued that the State of Alaska
should not strictly regulate how the money is spent, as there
are many ways to make communities livable that would directly
benefit those in the fishing industry. He asked whether the
State of Alaska has always followed the revenue sharing formula
- or whether there have been times when the State of Alaska has
not paid out the full amount due to fiscal restrictions. He
wondered if the State is bound by the language - or whether the
money could be deposited into the State of Alaska's general fund
if needed.
4:18:58 PM
MR. SPANOS said that to his knowledge, the money has always been
appropriated to the designated fund, which has been shared with
the communities. He said that according to the [Shared Taxes and
Fees Annual Report], the State of Alaska distributed $16.17
million of fisheries business taxes to local communities. He
added that during the Covid-19 pandemic, the distribution
matched the previous year's share. He explained that during one
of those years, the legislature appropriated additional funds to
match the prior year's distribution.
4:20:03 PM
CHAIR GIESSEL announced invited testimony on SB 135.
4:20:24 PM
NILS ANDREASSEN, Executive Director, Alaska Municipal League,
Juneau, Alaska, read the following written testimony on SB 135:
[Original punctuation provided.]
Chair and members of the Senate Resources Committee,
Thank you for the opportunity to testify today. My
name is Nils Andreassen, and I am the Executive
Director of the Alaska Municipal League, representing
local governments across Alaska. We appreciate the
work of the Alaska Seafood Industry Task Force and the
thoughtful consideration of this bill, SB 135, which
reflects recommendations aimed at enhancing support
for coastal communities.
We are supportive of the intent of SB 135 to increase
the share of fisheries tax revenue distributed to
municipalities. This recognition of the important role
that local governments play in supporting the seafood
industry and providing services that benefit
fisheries-dependent communities is welcomed and
appreciated.
Alaska's coastal cities and boroughs are essential to
the operation and success of the state's seafood
industry. Local governments own and maintain the
majority of ports and harbors across the state,
managing critical infrastructure that enables the safe
and efficient movement of significant volumes of
seafood. Many of these facilities are aging and
require ongoing investment to ensure their continued
functionality and safety. The revenue provided through
fisheries taxes is essential for maintaining these
assets and supporting the broader network of services
and infrastructure that enable this industry to
thrive.
Further, the benefits of this revenue extend beyond
infrastructure maintenance. It supports emergency
services, transportation systems, housing, and other
community needs that directly and indirectly benefit
the seafood industry. For many of Alaska's
municipalities, fisheries-related revenue provides
essential funding that contributes to overall
community well-being and economic resilience. As you
work to move this bill forward, we would like to
respectfully raise a few points for consideration that
we believe would strengthen this legislation:
Not all recipients of fisheries tax revenue maintain
or operate harbor facilities. While we recognize the
importance of maintaining and improving these
facilities for the benefit of the seafood industry, a
requirement to allocate additional funds specifically
for this purpose may not be applicable or practical
for all local governments.
For instance, the business tax includes the
communities of Houston and Anderson, which aren't
coastal but where businesses are located that
contribute to the seafood industry. Another wrinkle to
consider is that while a borough like Kodiak Island
receives a share, it is the City of Kodiak that has
the port and harbor powers.
Flexibility in the use of these funds should be
considered to ensure all recipients can utilize them
in ways that best support their communities.
It is critical that this increase in revenue sharing
be seen as additive, rather than a replacement for
other forms of state investment. Local governments
depend on a predictable and reliable revenue stream to
meet their obligations and to provide services that
benefit the industry and community members alike. This
legislation should make clear that other forms of
state support are not to be diminished as a result.
4:23:51 PM
MR. ANDREASSEN continued to read from the following written
testimony on SB 135:
[Original punctuation provided.]
AML last surveyed port and harbor infrastructure
improvement needs in 2019 and identified $600 million
in needs. We will recreate that survey this year, but
the scale of need is important to evaluate and ensure
that together we are appropriately meeting the needs
of these communities relative to the industries
dependent on improvements.
Finally, we are concerned about the potential
administrative burden associated with the requirement
for annual reports. For many local governments,
particularly those that receive only a minimal amount
of revenue from this program, the cost of compliance
may exceed the benefit of the increased share. We
recommend the Committee consider ways to streamline
reporting requirements to ensure they are not
unnecessarily burdensome.
I noted payments of the fisheries business tax in FY
23 to two communities of $244 and $214 each. We have
to think about the increase involved and whether it
actually increases the ability for these communities
to improve facilities, or complete the annual report
to the Legislature that will now be necessary. Perhaps
there are alternatives to achieve this same goal.
The Alaska Municipal League and its members are
supportive of finding additional ways in which the
State may contribute to investments in coastal
communities, and we commend the Task Force and this
Committee for its consideration. We appreciate your
willingness to consider these suggested improvements
and look forward to continuing to work with you to
enhance this legislation for the benefit of not just
local governments, but the seafood industry that is
interdependent.
Thank you for your time and consideration. I am happy
to answer any questions you may have.
4:25:40 PM
SENATOR DUNBAR agreed that the reporting requirement is
excessive for communities that receive minimal amounts. He asked
about the maximum amount communities receive and wondered what a
reasonable cutoff would be. He wondered whether "$10 thousand or
more," or "$50 thousand or more" would be reasonable. He
acknowledged that keeping track of the funds is important;
however, he suggested that a report may be unnecessary for $240.
4:26:26 PM
MR. ANDREASSEN replied that he does not have those numbers;
however, he surmised that DOR would have that information. He
opined that each community should be allowed to determine the
appropriate cutoff. He emphasized that any increase in revenue
is positive for local governments. He noted that the funds are
used for a variety of community needs. He pointed out that
communities may have complicated harbor improvement and capital
improvement plans, along with other community needs. He
indicated that determining the distribution amount and the
reporting requirement cutoff could be complex and stated that
this should be based on the circumstances of each community. He
noted that SB 135 would increase the revenue share for use on
port and harbor maintenance and other infrastructure needs, and
all communities would receive an increase. However, he pointed
out that needs differ greatly by community. He stated that the
increased revenue share should be structured and disseminated in
a way that is responsive to the needs and resources of each
community.
4:28:12 PM
SENATOR DUNBAR acknowledged that communities have unique needs
and would prefer a more wholistic approach; however, he
indicated that choosing a specific cutoff may be necessary for
administrative simplicity. He pointed out that SB 135 is not
structured in a way that is responsive to each community's
needs. He commented that a more responsive approach to funding
could be found in the capital grant process, whereas SB 135
offers blanket community revenue-sharing. He argued that this
type of revenue sharing maintains more flexibility.
4:29:18 PM
MR. ANDREASSEN commented that a blanket increase is the fairest
way to distribute the funds. He pointed out that the ASTF report
recommends that 100 percent of the funds be distributed to the
local communities and suggested that this amount would create a
high bar. He clarified that AML is willing to work with the
committee and the legislature to ensure SB 135 is a right fit
for everyone involved. He said that many of the task force
recommendations are interdependent, and local governments have a
role in most of those recommendations. He emphasized the
importance of thinking about the recommendations wholistically.
He reiterated that AML appreciates SB 135 and is willing to be a
part of those conversations as the legislation moves forward.
4:31:09 PM
SENATOR STEVENS expressed appreciation for Mr. Andreassen's
comments. He reiterated that two communities have lost their
local processors and receiving a larger share of the tax would
not provide an advantage to those communities. He opined that it
makes sense for the communities to use those funds as they see
fit. He acknowledged the challenges that coastal communities
will face in the coming years. He indicated that it would be
reasonable to deposit the funds into each community's general
fund and allow communities to decide where those funds are most
needed.
4:32:07 PM
CHAIR GIESSEL held SB 135 in committee.