02/27/1995 03:02 PM House L&C

 HL&C - 02/27/95                                                               
 HB 116 - EXEMPT ASMI FROM PROCUREMENT CODE                                  
                                                                               
 Number 021                                                                    
                                                                               
 REPRESENTATIVE ALAN AUSTERMAN, Prime Sponsor of HB 116, stated that           
 this bill was introduced to exempt the Alaska Seafood Marketing               
 Institute (ASMI) from the procurement codes.  It seeks to eliminate           
 the restrictive requirements of the state procurement code in                 
 marketing Alaskan products in the United States.  He pointed out              
 there was also an amendment to add to the original bill.                      
                                                                               
 REPRESENTATIVES ROKEBERG, KUBINA & SANDERS arrived at 3:05 p.m.               
                                                                               
 REPRESENTATIVE NORMAN ROKEBERG asked if they had any communications           
 with other entities that were exempt under this statute.                      
                                                                               
 REPRESENTATIVE AUSTERMAN pointed out that if they were exempt, they           
 wouldn't have any problems.                                                   
                                                                               
 CHAIRMAN KOTT noted that ASMI had been operating since 1981.  He              
 asked how, up until this time, they had been able to operate under            
 the confines of this statute as it currently exists.                          
                                                                               
 Number 100                                                                    
                                                                               
 REPRESENTATIVE KIM ELTON stated that changing this procurement code           
 had been a priority of the ASMI board for the past several years.             
 The problem was that the ASMI board had received a significant                
 amount of money from the state, especially in the domestic market             
 place, but within the last two years there has been a transition              
 away from this funding.  He stated that ASMI domestic marketing is            
 now completely funded by the industry.  The board recognized that             
 there might have been a problem asking to get rid of state                    
 procurement, when state general fund dollars were going into it at            
 that time.                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG asked if the funding for ASMI was entirely            
 self-generated and whether there is anything on the horizon for               
 which they expect to ask for additional funding.                              
                                                                               
 REPRESENTATIVE AUSTERMAN replied that he wasn't aware of anything             
 of that nature.  He explained that the amendment to HB 116 directs            
 the ASMI board to create within themselves a procurement policy of            
 their own.                                                                    
                                                                               
 Number 149                                                                    
                                                                               
 JERRY McCUNE, PRESIDENT, UNITED FISHERMEN OF ALASKA (UFA), stated             
 they support HB 116.  Most of the members pay their taxes to the              
 domestic market and feel it very cumbersome to have this code                 
 restricting the way they do business.  He stated the procurement              
 code restricts actions ASMI can do under contracts.                           
                                                                               
 Number 173                                                                    
                                                                               
 DAVE WILDER, CHAIRMAN OF THE BOARD, ASMI, explained that the                  
 situation at ASMI had changed over the past two years.  It went               
 from an 18-member board to a 25-member board, made up of 12                   
 fishermen, 12 processors and 1 member of the public.  Their                   
 committee structure, which was put in place by the legislature,               
 includes a salmon marketing committee designated by the legislature           
 to oversee the moneys collected from the salmon fisheries and make            
 recommendations to the board on their behalf.  He stated the salmon           
 industry in Alaska was in a crisis.  The encroachment on sales both           
 domestically and internationally, by farmed salmon, foreign seafood           
 production, and by other protein markets, has caused them to lose             
 market share and reduces the price they receive.  He stated the               
 board directed ASMI to change their status to seek relief from the            
 state procurement code.                                                       
                                                                               
 MR. WILDER added they had developed a comprehensive domestic                  
 marketing plan that has brought more staff into the Lower 48                  
 operation and has brought a much greater need to have the                     
 flexibility they were seeking.  He explained several of the issues            
 that were involved as the basis for seeking this relief:  Fishermen           
 and processors finance ASMI domestic operations; they have offices            
 in Juneau and Seattle, and the majority of activities are carried             
 out in Seattle.  Many of these activities require immediate                   
 response and flexibility.  Going through the procurement code                 
 process eliminates the possibility of taking advantage of                     
 situations that would benefit the industry and allow them to sell             
 more product at higher prices.  He stated that the board was                  
 committed to a cost efficient structure to promote quality in                 
 marketing Alaskan seafood products.  Roughly 33,000 people depend             
 on the industry for full-time jobs.  He concluded that it would be            
 in the best interest of the state and the industry to get relief              
 from the procurement code.                                                    
                                                                               
 Number 250                                                                    
                                                                               
 CHAIRMAN KOTT asked for a recent example of how the procurement               
 code had adversely affected ASMI.                                             
                                                                               
 MR. WILDER said that recently, they had hired two people under                
 contract to represent ASMI in their domestic retail program.  They            
 were not able to go out and hire them when they needed them because           
 it was over the $25,000 limit, and it took a substantial amount of            
 time.  He also said this has been the same issue in procurement of            
 office supplies, and slows up their process in dealing with                   
 out-of-state issues.                                                          
                                                                               
 Number 274                                                                    
                                                                               
 ART SCHHEUNEMANN, EXECUTIVE DIRECTOR, ASMI, related that ASMI had             
 taken a new course with a new marketing plan.  The marketing plan             
 is regional in nature, targeting the Lower 48 as the newest                   
 opportunity for Alaska's seafood expansion.  He explained that it             
 was an area that had not been evangelized in the past to the degree           
 that the seafood industry, fishermen and processors want it to be             
 in the future.  Part of the plan, based on extensive research,                
 strongly suggested that they focus on the central core of the                 
 United States, where 25 percent of the U.S. population resides                
 above average in disposable income.  The marketing strategy also              
 provided that as they become successful in those regional areas,              
 they would roll out in other regions placing five individuals for             
 a total of five regions to represent Alaska's seafood interests.              
                                                                               
 MR. SCHHEUNEMANN followed up on Mr. Wilder's example of the two               
 field marketing representatives that were put in place in                     
 September.  He stated that it took three and one-half months to               
 place them in the field.  Because the contract for the individual             
 was over $25,000, they couldn't advertise in the Lower 48 or do               
 normal recruitment.  These people weren't treated like potential              
 employees applying for a job.  They had to accommodate the                    
 procurement process by becoming licensed contractors in the state.            
 Instead of having those people in the field setting up contacts,              
 building relationships, and developing what needs to be done in the           
 retail marketplace, food service and consumer advertising areas,              
 they were behind the curve.  The season had been upon them for some           
 time.  He stated this would be a very cumbersome and costly process           
 when they hire the other regional representatives.  He pointed out            
 that as the organization becomes more aggressive in terms of                  
 marketing strategy, his retail director might want to work with               
 multiple contractors to provide different services at any one time.           
 He indicated that they did not want to have to go through this                
 lengthy process.                                                              
                                                                               
 MR. SCHHEUNEMANN pointed out that this system was designed for                
 state bureaucratic agencies to protect themselves and to make sure            
 all vendors from "outside" had equal access to state services that            
 were being contracted out.                                                    
                                                                               
 Number 402                                                                    
                                                                               
 CHAIRMAN KOTT asked if ASMI advertises within the state.                      
                                                                               
 MR. SCHHEUNEMANN replied that virtually all advertising is done               
 outside the state, although there is an instate awareness                     
 communications program.                                                       
                                                                               
 Number 428                                                                    
                                                                               
 REPRESENTATIVE ELTON added that many of the instate efforts of ASMI           
 have been in quality working with fishermen and processors.  He               
 expounded that you could sell a fish once, but if it's bad quality,           
 you have a tough time selling it a second time.                               
                                                                               
 Number 440                                                                    
                                                                               
 CHAIRMAN KOTT stated there was an amendment before the committee.             
                                                                               
 REPRESENTATIVE ROKEBERG made a motion to adopt amendment 1 to HB
 as presented.                                                             
                                                                               
 CHAIRMAN KOTT asked if there was objection.  Hearing none, the                
 amendment was adopted.                                                        
                                                                               
 REPRESENTATIVE ROKEBERG offered amendment 2, page 1, line 12, to              
 delete subsection 3, the Alaska Housing Finance Corporation (AHFC),           
 and to adjust the following numbers of the underlying subsections.            
                                                                               
 REPRESENTATIVES ELTON & KUBINA objected.                                      
                                                                               
 REPRESENTATIVE AUSTERMAN stated that he could not support this                
 amendment.                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG offered that this bill was an exemption to            
 the procurement code to the state of Alaska.  He suggested that               
 perhaps they should be looking at changing the procurement code and           
 not the exemptions.                                                           
                                                                               
 REPRESENTATIVE AUSTERMAN agreed with that position.  He stated he             
 would be happy to sign on if someone was willing to redraft the               
 procurement codes of the state of Alaska.                                     
                                                                               
 REPRESENTATIVE ELTON stated he would be intrigued and possibly a              
 Co-sponsor if there was another bill that discussed the different             
 things that AHFC was doing.  He related that the major difference             
 between AHFC and ASMI was that ASMI was using industry dollars and            
 needs the latitude that industry has in their private marketing.              
                                                                               
 Number 504                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG asked Representative Elton if industry                
 dollars refer to a fish tax.                                                  
                                                                               
 REPRESENTATIVE ELTON answered that there were three primary income            
 streams into ASMI.  The first was the .03 percent tax on seafood              
 processed in state, the second was created by the last legislature            
 when they passed a 1 percent assessment on the value of salmon                
 product in the state, and the last income stream is federal, which            
 last year was over $5,000,000.  The later is used exclusively in              
 overseas marketing and is secured with a 15 percent cash match by             
 the state general fund.                                                       
                                                                               
 REPRESENTATIVE ROKEBERG withdrew his amendment.                               
                                                                               
 Number 542                                                                    
                                                                               
 REPRESENTATIVE ELTON made a motion to move CSHB 116(L&C) out of               
 committee with individual recommendations.                                    
                                                                               
 CHAIRMAN KOTT asked if there was any objection.  Hearing none, the            
 motion passed.