Legislature(2001 - 2002)
02/28/2002 01:54 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 288
"An Act relating to commercial fisheries limited entry
permit buy-back programs."
REPRESENTATIVE DREW SCALZI, SPONSOR, spoke in support of the
legislation. He observed that the legislation would change
state statutes governing the buy back provision, currently
allowed under the limited entry permit system. He noted that
the bill removes the requirement that a state buyback
program be implemented after determination from an optimum
number study that the optimum number of permits is lower
than the number of permits currently in fishery. The
legislation eliminates the requirement that a buyback
program, buy out vessels and gear as well as permits. This
is the biggest detriment to a buy back program. He
maintained that the provision has prevented the
implementation of a program since its inclusion in statute
28 years ago. [Buying back vessels and gear] is a very
cumbersome and costly process.
Representative Scalzi explained that the legislation also
eliminates the mandate for a "dedicated fund", which is a
constitutional problem that exists in the funding mechanism
under current law. The provision provides that an assessment
on fishermen go directly into a buyback fund. Currently,
assessments go to the general fund and the legislature has
the discretion to appropriate the funds. The Commission has
no taxing authority. The provision [for a dedicated fund]
would be eliminated because it is constitutionally illegal.
Representative Scalzi observed that the legislation makes
only transferable permits eligible for buyback. (Current law
has provision for buying out nontransferable permits if
sufficient funds are available in the buyback fund.) He
acknowledged those with a nontransferable permit would be
unhappy with the provision, but emphasized that it would
help to extenuate a cheaper buy back program.
Representative Scalzi summarized the remaining changes
incorporated in the proposed committee substitute. The
committee substitute would eliminate the requirement to buy
the permits back within a 10-year period. The holder of a
permit may voluntarily relinquish their permit (whether
under a fleet consolidation or for any other reason). The
committee substitute also adds a definition of "optimum
number" to set an optimum number range, rather than one
number. The Commission doesn't know the optimum number that
would constitute a buy back. The only way that the
Commission can do it now is to throw out a number, buy the
permits to that number and then go to a judicial test; the
courts would decide the actual optimum number. He observed
that there is a disincentive since the court could rule
permits must be put back into the system if the buy back is
too low.
Representative Scalzi reiterated that under the current
law, the permit, vessel, and gear would have to be bought
out, which would be cumbersome and expensive. The
legislation would help streamline the process.
Vice-Chair Bunde questioned which limited entry permits
would be non-transferable.
Representative Scalzi explained that there were non-
transferable interim permits.
Vice-Chair Bunde questioned if permits that are bought back
would still be transferable and could be reissued if the
fisheries regained strength or would they always remain
property of the state. Representative Scalzi explained that
the permits would be retired unless the court required them
to be issued.
In response to a question by Vice-Chair Bunde,
Representative Scalzi noted that there is a zero fiscal note
because the provision already exists. Until a buy back plan
is implemented there is no cost. The state controls the
resource and permits, but those remaining in the fishery
would pay for the Fund. The provision was removed because
the dedicated fund portion was illegal. However, a collected
program receipts such as operates under Alaska Seafood
Marketing Institute would be possible and the sponsor would
not object. A buy back plan would be tailored to each
individual area. He observed that other legislation would
allow a consolidation and stressed that the intent is to
stimulate buy backs.
Vice-Chair Bunde questioned if the legislation would make a
buy back more likely and asked when a buy back program would
begin. Representative Scalzi noted that there have been no
buy backs since 1974, due to the difficulty.
Co-Chair Mulder noted that: "The commission may establish a
buy-back program, a buy-back plan, and a buy-back fund for
that fishery. If the commission establishes a buy-back
program for a fishery, the commission shall request the
legislature to appropriate money…" He asked why "shall" was
used instead of "may". He clarified that it would be funded
through an assessment of the membership.
Representative Hudson observed that it would be similar to
the funding of the Northern/Southeast Aquaculture
Associations. Co-Chair Mulder pointed out that there are
alternative means to asking the legislature for a "big
check." He suggested that the language be clarified to
indicate that a general fund expenditure is not expected; it
would be an other funds expenditure.
Representative John Davies questioned if the intent was for
the Fund to be capitalized with an appropriation from the
legislature. Co-Chair Mulder noted that he would not support
capitalization by the legislation.
MARY MCDOWELL, COMMISSIONER, COMMERCIAL FISHERIES ENTRY
COMMISSION, DEPARTMENT OF FISH AND GAME explained that the
intent was to get around the designated fund source problem,
with the understanding that an assessment of fishermen would
be the most likely source of funds. Any money collected has
to come into the general fund and be appropriated by the
legislature. The current language does not provide authority
for an assessment on fishermen. She observed that language
would need to be added. There is a question as to whether
the Commercial Fisheries Entry Commission has taxing
authority. Language would need to be drafted to allow funds
collected off fish sales to go through the Department of
Revenue. She clarified that state funds for a buy back are
not anticipated. The legislature would be the source of the
pass through funds. There may be some federal funds. The
legislation removes the provision to automatically kick into
a state run buy back program if an optimum number study
determined that there are too many permits in the fishery.
Under current law, if a study were done, the state would
automatically kick into a buy back program [if the number of
permits exceeded the optimum number. Fishermen are
interested in pursuing other options such as federal
funding. The legislation would provide the flexibility for
the Commission to do an optimum number study. She noted that
there is a risk [without an optimum number study] that the
court would declare that the fisheries is too exclusive and
permits would have to be put back in [after a buy out] and
all of the effort and expense of buying permits would have
gone to waste. Fishermen would like help in determining a
defensible range, so that they would have some assurance
that that they won't be forced to put bought out permits
back into the fisheries.
Representative Lancaster summarized the need to clarify the
funding source.
Representative Scalzi explained that is the current language
identifies the legislature for the appropriation. The state
controls the fisheries and the permitting process.
Representative Hudson agreed that clarification is needed to
establish the funding source; how it is to be accounted for;
and the responsibility of all the participants. He noted
that aquaculture associations tax members a little so that
the funds continue to grow. He agreed that section 5 needs
more work. He thought that the language inferred that the
legislature would put the "seed" money into the fund. He
noted that the money would go out but nothing would come in.
Both need to happen. He observed that the remaining members
might want to underwrite an assessment in order to refuel
the fund. He agreed concluded that more work needs to be
done regarding an assessment.
Ms. McDowell recounted discussions with fishermen. She noted
that if a particular fleet had an optimum number
determination which showed that it was necessary to buy out
some of the permits a plan would be establish, which would
probably included an assessment. A statutory request would
then be brought back to the legislature for that fishery.
Buy back programs would be specialized for the individual
fisheries. There has been an assumption that the fishermen
would have to pay for the program "one way or anohter." An
assessment would have to be authorized in another piece of
legislation if it is not included in section 5.
Representative Hudson recommended the addition of assessment
authorization.
Representative Scalzi did not object to the addition of
assessment authorization. He acknowledged that it has been
difficult to get fishermen to consider a buy back program.
There is no one that feels that the state of Alaska is going
to pub money into a buy back program without an assessment.
The language was removed because it was illegal. He observed
that there are concerns regarding a mandatory buy back
program.
Representative John Davies did not think that the Commission
could establish a fund. There needs to be a receiving fund
and an expending fund created by the legislature. He
stressed that the intent needs to be clarified if it is to
be a sub fund in the general fund.
Ms. McDowell noted that discussions with the sponsor
occurred regarding an assessment of fishermen, which the
legislature would appropriated for the intended use. There
was legal concern about the Commission's taxing authority to
implement an assessment. An amendment would be needed to
allow the Department of Revenue to collect the funds.
HB 288 was heard and HELD in Committee for further
consideration.
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