Legislature(1999 - 2000)
03/08/2000 03:21 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 334-CHARGE FOR COMMUNITY DEVELOPMENT QUOTA CHAIRMAN ROKEBERG announced the next order of business would be HOUSE BILL NO. 334, "An Act relating to the establishment of and accounting for an administrative cost charge for the state's role in the community development quota program and to the appropriation of receipts from the charge; and providing for an effective date." [Before the committee was CSHB 334(CRA).] Number 0326 JEFF BUSH, Deputy Commissioner, Department of Community and Economic Development, came forward to testify on HB 334. He stated: I hope the committee is familiar with the CDQ [community development quota] program. This is the program in Western Alaska that allocates federal fisheries in the Bering Sea at a percentage of the federally regulated fisheries in the Bering Sea to Western Alaskan communities...Overseeing the program is done through the State [of Alaska]. It's been in operation for approximately eight years now. It's extremely successful. It has about $30 million in annual royalties right now, ... received by the communities in Western Alaska that are organized into six CDQ groups, as we call them, which are nonprofit corporations. The communities all have representatives on the boards of these nonprofit corporations. The corporations in turn receive allocations that are recommended by the state oversight group and then approved by the federal government through NMFS [National Marine Fisheries Service]. The current estimates are [that] approximately 1,300 jobs annually are generated through the program and it's a growing program because the corporations are essentially growing exponentially because of their ongoing profits and the royalties they receive. Beginning last summer, the state - recognizing the budget problems that the legislature and the Administration in this state was having - met with the groups and suggested that this was a program that is very important for them to retain efficient and adequate state oversight. One of the reasons is ... that when they want to enter into business deals, by federal law, they have to have their amendments to their plans approved. In other words, these business deals have to go through a review by the State and then by the federal government. It's in their best interest to have these things occur as quickly and as rapidly as possible. So, as the numbers of business deals and the size of the business deals grows, it's important for them to retain at least the current state oversight. Number 0471 What we suggested was, because this was a program that receives a great deal of, sort of, subsidies - I hesitate to use that word, but it's essentially a federal program that does subsidize these corporations - that they should in turn pay for the program themselves. So, what this bill proposes to do is to take the money that is presently paid for through the general fund of $250,000 of GF [general fund] and have instead a fee program set up that the groups would pay for, through statutory designated program receipts, the same $250,000, thereby freeing up $250,000 of general fund. They have come to the table. This proposal was, in fact, in terms of the allocation formula, was proposed by the groups as far as I understand...all six groups have sent in letters to the Legislature in support of this proposal. It isn't often that I get to say that it's such a good bill, that I think everybody, including those who are about to pay the fees, fully supports. Therefore, it's a win-win for all parties involved. CHAIRMAN ROKEBERG indicated an amendment in the bill packet was similar to an amendment that the Senate adopted on companion legislation to HB 334. The written amendment [Amendment 1, which was later amended and then adopted] read as follows: Page 3, line 5, insert new subsection (f) as follows: "(f) The department shall not assess nor collect administrative charges under this section from CDQ groups, representing communities not eligible for the CDQ program as of the effective date established in section 6 of this Act, for a period of two years from the actual award of fishery quota to that newly formed CDQ group." Re-letter subsequent sections accordingly. MR. BUSH, in response to Chairman Rokeberg's inquiry, said the department is neutral on the amendment because it does not affect the amount collected by the state. The department is aware that the existing groups are opposed to the amendment. If a new group is formed, the existing groups would have to cover the expenses of the new group. Number 0650 REPRESENTATIVE HARRIS said that is the reason the House Community and Regional Affairs Standing Committee did not pass the amendment. Existing groups felt it was an unfair advantage that new groups would have. The testimony he heard was in opposition to this, but he has no personal opinion regarding this matter. REPRESENTATIVE HALCRO asked who covers the costs for the six CDQs. MR. BUSH replied that the costs are covered internally by the groups. The royalties are worth about $30 million annually. The groups are earning profits more than this amount. He specified that state oversight is paid for by the general fund (GF). REPRESENTATIVE HALCRO asked how long the state has paid for oversight through the general fund. MR. BUSH responded that it has been since 1991 or 1992. REPRESENTATIVE HALCRO said, "So, for eight years these six have been getting a free ride with [regard] to being responsible for oversight." MR. BUSH affirmed that. CHAIRMAN ROKEBERG commented, "And that's the idea of the amendment, that if these people came in, at least they would have ... some theory of equity." MR. BUSH stressed that he was not here to argue one way or another. CHAIRMAN ROKEBERG asked whether Mr. Bush could explain the House's budget position on this bill. MR. BUSH responded that it is not presently included in the House budget. There is a fiscal note associated with the bill. CHAIRMAN ROKEBERG surmised that the department would not be able to fund the program unless HB 334 passed because there would not be any GF funding available. MR. BUSH stated that funding is still currently in the budget bill, and HB 334 is simply an adjustment to the budget bill. Number 0815 LARRY COTTER, Chief Executive Officer, Aleutian Pribilof Island Community Development Association [APICDA], came forward to testify on HB 334. He confirmed that all six current CDQ groups do support HB 334. He is also aware that the six groups oppose the amendment. There is opposition to the amendment because a new CDQ group will be funded with allocations which are currently shared among the existing groups. The existing groups would lose allocation, which could easily be measured in the millions of dollars. The total cost to currently provide oversight is $250,000, but HB 334 would allow the amount to rise as high as $400,000. He said it is an equity issue and if considerable revenues are going to be lost by the addition of new groups, those groups can pay for their own share of oversight. If the committee chooses to adopt the amendment, he suggests some "word smithing." The way it reads now, his group or any other group picking up a new community as part of their group would not be required to pay its share of the CDQ fees. Number 0944 REPRESENTATIVE HARRIS wondered if Mr. Cotter believes that his group and the others received a free ride from having to pay the administration costs that the state pays from the GF. He also asked if he feels the groups were given the benefit of developing a savings account and wondered if the new groups would not have this advantage. MR. COTTER said the issue isn't as black and white as that. He said: I think somebody could make that argument that we did not have to pay so why should somebody else have to pay, but there are, in different cases, extenuating circumstances. In our particular groups' case, a fair amount of our allocation was being harvested by factor trawlers. At that time, factor trawlers were not required to pay raw fish tax. What our group did, voluntarily, is we took the raw fish tax that would have been paid had that fish been landed ashore, and we wrote a check to the State every year to voluntarily pay that tax which amounted to, I think we paid upwards of 70, 80, 90 thousand dollars during the first three years. Other groups did similar things in their own way. I'll just be candid. Again, I don't think the amount of money is the big deal because if there is a new group, it will be able to afford to pay that $40,000 to $70,000. I do think that the equity side of it is important because all the revenue they're going to be receiving will come from the existing six groups and that'll be substantial. Number 1068 REPRESENTATIVE HALCRO commented: Your testimony was that $40,000 to $70,000 a year isn't a big nut to swallow and if there is a new CDQ, it could be able to afford it; but what about the six CDQs the last eight years? I mean would it be fair to say the State can go back and collect the yearly administration or oversight charges? ... Here's my point: For eight years, we've covered the costs through general fund dollars of oversight. If - and that's a big if - if there are new CDQs introduced, two years is not a long time to allow them to get their feet on the ground and organize and get their act together when, in fact, the other six have obviously had eight years. MR. COTTER reiterated that he does not believe the amount of money is the important issue. He pointed out that his group put millions of dollars in matching funds into infrastructure in their communities. That was money the state did not have to spend. REPRESENTATIVE BRICE asked Mr. Bush what incremental costs for the department are associated with the addition of new CDQs. Number 1182 MR. BUSH stated: I believe that part of the reason this allocation formula was come up with where the groups, despite whatever their respective allocations are, half of the amount that's going to be charged is based upon a straight, across the board, every group pays one-sixth of the half. The reason for that was a recognization that size of the group did not necessarily reflect the amount of work that was associated with the groups. Small groups sometimes generate more work at the administrative level. Large groups generate less sometimes. New groups generally are going to require more State administrative oversight than older groups. REPRESENTATIVE BRICE asked what the additional cost would be to the department right now if a new group were added. MR. BUSH said he does not believe the department would ask for increments if there were a new group. The department is trying to protect existing administration and not lose GF on a new program that does not need it. Number 1297 DICK TREMAIN, Central Bering Sea Fishermen's Association, testified via teleconference from Anchorage. His organization is one of the six CDQ groups. He explained: This is a user fee program...When you institute a user fee, at least in Anchorage here, when we institute a user fee, as we did last night for fire inspections, we don't go back six years and charge everybody for the fire inspections that they had, we charge them in the future. In fact, we don't even go back to January 1, we're going forward when we begin the fee charge on April 1. And that's what this CDQ program thing basically is. There's mandated state oversight through federal law. We know that there's a state budget crunch. The CDQ groups realize that we are receiving (indisc.) and that it is right and just and moral sense for us to pay a user fee and that's what this is all about. In that sense, any new group would also be in that same position. I'd point out that I don't have the pleasure of having the amendment in front of me, but Mr. Cotter said there are some word changes that need to be made. I fully believe that. It may be that that amendment speaks to new communities rather than new groups. There are communities that become eligible under federal law. These communities band together by one or more to form groups. The 60 some communities that are currently in the program have formed six groups. So, I would make sure that if you do add an amendment, which I would recommend against, but if you do add it, it would need to discuss groups and not communities. I would recommend that you move this out of committee with a recommendation that it be passed by the entire the House. Number 1423 ROBIN SAMUELSON, President, Bristol Bay Economic Development Corporation [BBEDC], testified via teleconference from Dillingham. He stated: My board has been very supportive of paying our fair share to the State. We support HB 334 without the amendment, Mr. Chairman, and feel that there's been compromises by the CDQ groups in presenting this (indisc.) structure. As far as the amended language, Mr. Chairman, in the Senate the other day, they voted on the amended language before they took public testimony which I thought was kind of weird and then they took public testimony and there was some discussion about withdrawing the amendment and they said, "Oh, we've already passed the amendment." In prior House committee meetings, we were able to give public testimony and then the committee voted up or down and they didn't include the amended language. Apparently, there's a three percent fee structure that will be implemented by the National Marine Fisheries Service, up to three percent on the CDQ groups. The State will get their fair share...for State oversight,...but because of the budget cuts that you are all facing down there in Juneau, we entered into talks with the State of Alaska to pay our fair share. So, we are picking up that burden willingly, and, as I said, it's been negotiated out and we'll gladly help the State out and their budget shortfalls by paying our fair share. Number 1544 REPRESENTATIVE HALCRO made a motion to adopt Amendment 1 [text provided earlier]. [There was an objection.] REPRESENTATIVE HALCRO said if there are CDQ programs that are allowed to join the program, they have two years to become established. He does not think it is a big deal. He pointed out that the state has carried the existing CDQ groups. He believes the new CDQs will be contributing partners after two years, and will invest in infrastructure in their communities just as much as the existing groups. It is his opinion that a two-year grace period is totally equitable. CHAIRMAN ROKEBERG commented that one-seventh of $250,000 is $36,000. There would be a fiscal note if the amendment were adopted. REPRESENTATIVE HALCRO clarified that Mr. Bush had said there would not be any additional charges. CHAIRMAN ROKEBERG stressed that there would not be any charges because the money will not be obtained. He added, "As a matter of fact, excuse me very much, if they were exempt, then the state would lose ... designated program receipts of $36,000." Number 1636 REPRESENTATIVE HARRIS said he had objections along those same lines. He does not favor giving new groups an advantage. REPRESENTATIVE BRICE offered a friendly amendment to the second line of the amendment, adding "new" between "from" and "CDQ groups". CHAIRMAN ROKEBERG asked if there were any objections. There being none, the amendment to Amendment 1 was adopted REPRESENTATIVE BRICE explained that there had been testimony from the department that there is no incremental cost for an additional person and, therefore, there is no fiscal note. He believes it is a good thing if the intent is to expand the CDQ groups. But if the intent is to put exclusivity into statute to forbid the development of new groups, then he thinks the bill should be passed without the amendment because the amendment allows for new groups to participate. CHAIRMAN ROKEBERG said he does not think rejecting the amendment creates a barrier. The new group would simply have to pay the existing fee, and that would be ongoing cash flow straight into the department. REPRESENTATIVE BRICE stated that the department just testified that that is not the case. REPRESENTATIVE HARRIS referred to the amendment and stated that one of the previous testifiers had a concern with the language "representing communities not eligible for the CDQ program" in reference to the CDQ groups. He believed, based on previous testimony, that communities were different than groups. He wondered if this issue has been addressed. REPRESENTATIVE HALCRO interjected: Mr. Chair, if you look at it, it says ... not eligible for CDQ programs, so that means everybody outside of the program as of the effective date established in Section 6 of this Act, which is 6/30/2000, so anybody who's not in 6/30/2000, and is awarded a CDQ, or can form a CDQ group, and join the program, they would get, basically, what I consider a two-year incentive. If you're in already, if there's an existing CDQ that wants to branch out, they're already in before 6/30/2000, so they wouldn't be eligible. ... Everybody in before 6/30/2000 doesn't get the incentive, doesn't get the two-year waiver. A roll call vote was taken. Representatives Cissna, Brice, Sanders and Halcro voted in favor of Amendment 1, as amended. Representatives Harris and Rokeberg voted against it. Therefore, Amendment 1 was adopted by a vote of 4-2. REPRESENTATIVE HALCRO made a motion to move CSHB 334(CRA), as amended, out of committee with individual recommendations and the attached fiscal note. There being no objection, CSHB 334(L&C) moved from the House Labor and Commerce Standing Committee.
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