Legislature(2001 - 2002)

03/28/2001 01:10 PM House RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 194-ENTRY PERMIT FEES                                                                                                      
                                                                                                                                
TAPE 01-24, SIDE B                                                                                                              
Number 2995                                                                                                                     
                                                                                                                                
CO-CHAIR SCALZI announced  that the next order  of business would                                                               
be HOUSE  BILL NO. 194, "An  Act relating to fees  for commercial                                                               
fishing  licenses and  permits;  and providing  for an  effective                                                               
date."                                                                                                                          
                                                                                                                                
[There was a motion to adopt  HB 194 for discussion purposes, but                                                               
it was already before the committee.]                                                                                           
                                                                                                                                
Number 2958                                                                                                                     
                                                                                                                                
REPRESENTATIVE  STEVENS,   speaking  as  the   sponsor,  informed                                                               
members that  HB 194 involves a  very complex subject.   It has a                                                               
lot  to  do with  the  1982  Carlson  case, a  class-action  suit                                                             
brought against the State of  Alaska and the Commercial Fisheries                                                               
Entry Commission  (CFEC) for  charging a  three-to-one difference                                                               
between  nonresident  and  resident  fishermen.    Representative                                                               
Stevens detailed the  supreme court's decision:   the state would                                                               
not be  allowed to  charge three-to-one, but  instead must  use a                                                               
differential based on the difference  paid in taxes by a resident                                                               
versus a nonresident.   The [supreme court] still has  to rule on                                                               
what the state  owes in the case.   If the state  loses the case,                                                               
it may owe more than is estimated now.                                                                                          
                                                                                                                                
REPRESENTATIVE  STEVENS  further  explained  that  HB  194  would                                                               
repeal the  present statute regarding  the 3:1 ratio  and replace                                                               
it with  language that  allows the  state to  charge nonresidents                                                               
"the maximum  amount allowed  by the court".   He  mentioned that                                                               
the state's attorney, Stephen White,  argued the case in superior                                                               
court,  where he  suggested six  budget categories  in which  the                                                               
state would be  able to charge nonresidents  more than residents.                                                               
In June 2000, the superior court  came up with a formula for what                                                               
the  state  could  charge,  allowing  only two  out  of  the  six                                                               
categories.   Representative  Stevens  said this  could cost  the                                                               
state $22.5 million;  Mr. White would be  appealing that decision                                                               
in the state  supreme court, in an attempt to  get the other four                                                               
categories included in the formula.  He continued:                                                                              
                                                                                                                                
     Even now, today,  if you were to go down  to the [CFEC]                                                                    
     and  apply  for  a  limited [entry  permit],  you'd  be                                                                    
     charged   ...  three   times  more   than  out-of-state                                                                    
     fishermen, ...  despite what the  court has ruled.   So                                                                    
     what we're doing  is ... adding to  that liability that                                                                    
     we will  owe at some  point in  the future.   This bill                                                                    
     will  allow the  [CFEC] to  stop charging  three-to-one                                                                    
     and begin to charge this  maximum amount allowed by the                                                                    
     courts.                                                                                                                    
                                                                                                                                
     If the bill  is passed, the CFEC will begin  to use the                                                                    
     formula  the court  has directed  us to  use, based  on                                                                    
     those two  budget categories.   At  the same  time, the                                                                    
     Department  of Law  will continue  trying to  get those                                                                    
     other four  categories into the  formula.  HB  194 will                                                                    
     help us  resolve the problems  we're facing  right now.                                                                    
     Hopefully, it will not  create any additional problems.                                                                    
     It gets rid  of that ... three-to-one ratio.   It shows                                                                    
     that we are  acting in good faith with the  courts.  It                                                                    
     shows that when we realized  what our liability was ...                                                                    
     we took steps to correct things.                                                                                           
                                                                                                                                
REPRESENTATIVE STEVENS said it doesn't  "get us anywhere to stick                                                               
with the  present statute."  He  pointed out that in  addition to                                                               
needing  a statute  change when  the court  decides which  budget                                                               
categories  can  be listed,  the  state  already must  change  it                                                               
because of  the court's decision  against the state's use  of the                                                               
three-to-one ratio.                                                                                                             
                                                                                                                                
Number 2732                                                                                                                     
                                                                                                                                
MARY   McDOWELL,   Commissioner,   Commercial   Fisheries   Entry                                                               
Commission  (CFEC), Alaska  Department  of Fish  & Game  (ADF&G),                                                               
spoke  on behalf  of  CFEC  in support  of  HB  194, saying  CFEC                                                               
believes the bill is a "win-win action."  She said:                                                                             
                                                                                                                                
     By  adopting  the  provisions  of  this  bill  now,  as                                                                    
     opposed  to  sticking  with  the  current  statute  and                                                                    
     fixing it  after the supreme  court has  finally ruled,                                                                    
     we're actually ahead, whether or  not the supreme court                                                                    
     rules in our favor.                                                                                                        
                                                                                                                                
MS. McDOWELL stated that recently  the Department of Law has done                                                               
briefings for  several legislative  committees on the  details of                                                               
the Carlson case;  therefore, most of the  legislature is "fairly                                                             
familiar" with  the potential fiscal  ramifications of  having to                                                               
pay these possible  refunds and interest for  past overcharges of                                                               
nonresident  fishing licenses.    She referred  to the  sponsor's                                                               
explanation and  said the Carlson case  raises prospective issues                                                             
such as what  the fee structure should be now  and in the future.                                                               
The subject of  HB 194 is how a fee  structure can be established                                                               
that is  "feasible to administer  and will maximize  our revenues                                                               
from nonresidents, while avoiding possible future liability."                                                                   
                                                                                                                                
MS.  McDOWELL  explained  that   the  "three-to-one"  mandate  in                                                               
statute  is the  main issue  in this  bill.   She said  [CFEC] is                                                               
continuing to use  this ratio, even though the court  has said it                                                               
unconstitutionally overcharges  nonresidents in  some of  the fee                                                               
categories.     The  three-to-one   ratio  has  not   been  ruled                                                               
unconstitutional, but the  supreme court has said  that a formula                                                               
must be  used to charge higher  nonresident fees.  At  this point                                                               
in court, [the state] is  arguing which state expenditures can go                                                               
into that formula.                                                                                                              
                                                                                                                                
MS. McDOWELL said  the ratio by itself is  not acceptable, unless                                                               
fees for residents  and nonresidents are so low  that they happen                                                               
to  fall into  the  allowable differential.    For example,  with                                                               
crewmember  licenses,  the  state has  charged  three-to-one  for                                                               
years, but  the dollar amount is  so low that it  happens to fall                                                               
within what's  allowable.  For years,  [CFEC] charged [residents]                                                               
$30 and  [nonresidents] $90; last  year, that was changed  to $60                                                               
and $125, respectively,  but since the dollar amount  is so small                                                               
and it stays within the ratio,  no refund will be owed.  However,                                                               
within  higher permit  fee categories,  some permit  fees have  a                                                               
differential of $500 between residents  and nonresidents.  So, in                                                               
regard to allowable  fees by the court, she said,  if "we prevail                                                               
at  the supreme  court and  we get  differentials hiked,  we'd be                                                               
able to  charge double the  amount, similar to those  amounts ...                                                               
under the  provisions of this bill.   So, our revenues  would ...                                                               
go back up."                                                                                                                    
                                                                                                                                
MS.  McDOWELL remarked  that until  last summer's  superior court                                                               
decision, the state could claim that  the court had not set out a                                                               
specific  explanation  about  what   is  acceptable  and  how  to                                                               
calculate  the  differential.   Now,  however,  [CFEC]  has  that                                                               
direction  from  the  court.    She  noted  that  Stephen  White,                                                               
Department of Law, could elaborate on this.                                                                                     
                                                                                                                                
MS. McDOWELL commented  that if the superior court  ruling is not                                                               
overturned, what  is currently being  charged will accrue  a debt                                                               
of  approximately  $2.13 million  every  year  under the  current                                                               
statute.    In  addition  to this  debt,  approximately  250  new                                                               
members  are added  to the  Carlson  [class] each  year that  the                                                             
current three-to-one statute is used.                                                                                           
                                                                                                                                
MS.  McDOWELL noted  that HB  194 doesn't  address or  affect the                                                               
outcome of  the Carlson case,  since it affects  liabilities that                                                             
may be ultimately  found for charges in the past  or the present.                                                               
Those issues  will have  to "run  their course"  in court.   This                                                               
bill  affects what  [CFEC] would  charge for  licensing in  2002.                                                               
This  would happen  without conceding  to the  court's decisions.                                                               
It would support the state appeal.                                                                                              
                                                                                                                                
MS.  McDOWELL  explained  that  HB  194  keeps  the  current  $60                                                               
resident  fee for  crewmember licenses.   It  also allows  ADF&G,                                                               
which handles  crewmember licenses, to raise  nonresident fees to                                                               
"tack  on the  entire allowable  differential."   This will  help                                                               
offset the  loss and [CFEC's] having  to reduce the fees  in some                                                               
permit categories.                                                                                                              
                                                                                                                                
MS.  McDOWELL pointed  out  that  HB 194  also  addresses the  $5                                                               
crewmember license  for children 11  years and under -  which was                                                               
established  by  the  legislature  "one to  two  years  ago"  for                                                               
residents  and nonresidents  - by  authorizing ADF&G  to add  the                                                               
allowable nonresident differential to the $5 fee.                                                                               
                                                                                                                                
MS. McDOWELL  referred to  the annual renewal  fees for  the CFEC                                                               
permits, including limited entry  permits and interim-use permits                                                               
that  one  needs  for  an  unlimited  fishery.    Under  HB  194,                                                               
nonresidents  would be  charged the  base (resident's)  fee, plus                                                               
"up to"  the maximum allowable  differential that the  court will                                                               
allow.   Residents would  be charged slightly  more than  what is                                                               
under current statute.  The fee would  go from $250 to $300.  She                                                               
said  this is  not something  "that fishermen  love," but  United                                                               
Fishermen of Alaska  (UFA) supports this increase  to offset some                                                               
of the loss in revenues.                                                                                                        
                                                                                                                                
MS. McDOWELL noted  that this $250 cap for residents  has been in                                                               
effect  for 20  years  with  no changes.    However, permits  for                                                               
individual  fisheries  move  up  and down  within  the  five  fee                                                               
categories because  they are  charged for  each type  of license,                                                               
according to  the economic return  in that  fishery.  But  if the                                                               
cap were  set at  $300, then  each of the  five classes  would be                                                               
"proportionally hiked  by about  20 percent."   So,  for example,                                                               
under this bill,  the lowest fee class would go  from $50 to $60.                                                               
In short, the resident fee affects the nonresident fee.                                                                         
                                                                                                                                
MS. McDOWELL suggested that the  decision on the resident fee cap                                                               
be revisited after a final  supreme court decision, since at that                                                               
point  "we" will  know  what  happens to  the  revenues that  are                                                               
generated.  She said fees generated  by CFEC permit fees are also                                                               
used to fund the Division  of Commercial Fisheries (under ADF&G).                                                               
So it  [resident fee cap]  is a concern  to fishermen as  well as                                                               
the legislature.                                                                                                                
                                                                                                                                
MS. McDOWELL turned  attention to reduced "poverty  fees."  These                                                               
fees are  set in statute for  people who can show  they are below                                                               
poverty level; the  fees have been $15 for residents  and $45 for                                                               
nonresidents for years.   Ms. McDowell noted that  those fees are                                                               
not high  enough to cover what  [CFEC] is required to  submit for                                                               
insurance under the fishermen's fund.   She explained that HB 194                                                               
would set poverty  fees at half of the normal  fee a person would                                                               
pay for the annual renewal of a permit.                                                                                         
                                                                                                                                
MS. McDOWELL said this is a  modest change for most people, since                                                               
most  poverty  permits are  at  the  lowest  fee category.    She                                                               
reported that 700 out of 895  poverty fee permits in 2000 were in                                                               
the  $50 resident  fee  class;  under this  bill,  the fee  would                                                               
increase  to  $30  from  $15.   For  the  few  people  in  higher                                                               
categories  who  apply  for poverty  fees,  their  permits  would                                                               
increase more substantially;  for example, in 2000  there were 83                                                               
[poverty] permits in  the $100 [fee] class, and  those fees would                                                               
increase to  $60 under this  bill.  She went  on to say  that the                                                               
few  people  in  the  highest  fee  class  would  see  a  tenfold                                                               
increase, from  $15 to $150,  but it is  still a savings  of $150                                                               
[over the full fee].                                                                                                            
                                                                                                                                
MS. McDOWELL referred to the fiscal  note.  She said HB 194 would                                                               
save  $1.13  million  a  year  in refunds  and  interest  if  the                                                               
superior court  decision stands, or  more if the  plaintiff wins.                                                               
She said  even though the  fiscal note  shows a $470,000  loss of                                                               
revenue that [CFEC's]  fees generated, it is  a little misleading                                                               
because it  would be more than  offset by "other things  that the                                                               
bill  does."   The  first offset  would be  the  way refunds  are                                                               
calculated under the  Carlson case.  There is  a stipulation with                                                             
the  plaintiff's attorney  that credit  is given  if a  fisherman                                                               
over  time   has  held  permits   above  or  below   the  allowed                                                               
differential.  [CFEC] can a use  a year in which [fishermen] paid                                                               
less  than  what was  charged  to  them  in  order to  offset  an                                                               
overpayment.   So, if  [CFEC] wins in  supreme court,  and during                                                               
this  "intervening time"  CFEC has  undercharged,  it can  deduct                                                               
that amount from the refund owed.                                                                                               
                                                                                                                                
MS. McDOWELL  went on to say  that since this does  not come back                                                               
in the  form of a fee  receipt, there is still  concern that fees                                                               
that would  normally go to  the Division of  Commercial Fisheries                                                               
wouldn't go there.   But as far as the  state's fiscal situation,                                                               
the money "comes back" in the form of reducing those refunds.                                                                   
                                                                                                                                
MS. McDOWELL  noted that  if the  state does  not prevail  in the                                                               
supreme court, there  would be refunds plus  interest; thus there                                                               
is a savings by not charging  it upfront.  In the meantime, since                                                               
this bill  allows [ADF&G]  to hike  nonresident crew  member fees                                                               
right  away -  which could  offset a  substantial portion  of the                                                               
decline  in fees  while  [CFEC] is  having to  redo  some of  the                                                               
permit   fees  -   [CFEC]  can   be  increasing   the  crewmember                                                               
nonresident fee,  which would  help offset  it as  well.   If the                                                               
plaintiffs win the aspects that  they're appealing to the supreme                                                               
court, what [CFEC]  would save in this bill  wouldn't fully cover                                                               
the  additional debt,  but it  would reduce  what [CFEC]  owes by                                                               
$1.13 million a year.                                                                                                           
                                                                                                                                
MS.  McDOWELL concluded  by saying  HB 194  contains legally  and                                                               
financially responsible actions for the  legislature to take.  It                                                               
protects  the best  interests  of the  state  by "minimizing  our                                                               
potential accrual  of more debt  while seeking to  maintain state                                                               
revenues."   It  contains language  that is  "flexible enough  to                                                               
fulfill  this  purpose  on  into the  future  regardless  of  the                                                               
outcome in the high court."   This bill also "concedes nothing in                                                               
the Carlson  case; it can't  be construed  in any way  to concede                                                             
what the  state is arguing, and  it actually could help  us avoid                                                               
the risk  of punitive action by  the court."  It  provides a tool                                                               
for remaining in compliance to avoid further legal liability.                                                                   
                                                                                                                                
Number 1962                                                                                                                     
                                                                                                                                
REPRESENTATIVE  FATE asked  if the  poverty fee  is based  on the                                                               
amount  of income  derived  from the  fishing  enterprise or  the                                                               
total.                                                                                                                          
                                                                                                                                
MS.  McDOWELL  replied  that  it is  derived  from  total  family                                                               
income.                                                                                                                         
                                                                                                                                
Number 1962                                                                                                                     
                                                                                                                                
REPRESENTATIVE FATE said  even though he intends  to support this                                                               
bill,  he wants  to look  into the  issue of  crewmember permits.                                                               
Most  of   [the  bill]  emphasizes  deep-sea   offshore  fishing.                                                               
However, there is an inland-waterway  fishery in Alaska; for some                                                               
fisheries  [in   Western  Alaska],  people  couldn't   even  feed                                                               
themselves,  and yet  this is  an increase  for crewmembers.   He                                                               
added that these fisheries can't  have crewmembers anymore, since                                                               
they sold  no fish last year.   Most of those  family enterprises                                                               
consist of  a "man and  a wife going  out on the  boat together,"                                                               
with only one having a limited entry permit.                                                                                    
                                                                                                                                
MS.  MCDOWELL  remarked  that  this  bill  does  not  propose  an                                                               
increase in resident crewmember licenses.                                                                                       
                                                                                                                                
REPRESENTATIVE FATE  said he  realizes that,  since he  obtains a                                                               
license every year.                                                                                                             
                                                                                                                                
MS. McDOWELL  noted that for  a fishery  that does not  open, the                                                               
permit  fees for  the  year are  waived by  CFEC  for the  permit                                                               
holder.  However,  there is still a hardship  [fee] for fisheries                                                               
that open and have a poor season.                                                                                               
                                                                                                                                
Number 1858                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GREEN  asked  about  the  numbers  if  the  state                                                               
prevails or loses [in the Carlson case].                                                                                      
                                                                                                                                
MS. McDOWELL  answered that  [CFEC] had  to calculate  and submit                                                               
this under  the court  ruling by March  15.  She  went on  to say                                                               
there  are 11,000  plaintiffs  in the  [Carlson]  class, and  the                                                             
total refund calculated,  with interest, was $22.5  million up to                                                               
March 15,  2001; this amount  increases a  little each day.   The                                                               
plaintiffs  contend  that  no  differentials   at  all  would  be                                                               
allowable; if  they win, the  number hasn't been  calculated, but                                                               
it would be  much higher than $22.5 million.   She mentioned that                                                               
she could  obtain those  numbers.   She went on  to say,  "If the                                                               
state prevailed on  everything that it's arguing,  there would be                                                               
no refund - we would have no liability."                                                                                        
                                                                                                                                
CO-CHAIR SCALZI  asked:  If  Alaska implemented an income  tax in                                                               
the  next  few  years,  on both  residents  and  nonresidents  in                                                               
Alaska, and  the differential was  revisited, would it be  a part                                                               
of the differential consideration?                                                                                              
                                                                                                                                
STEPHEN  WHITE,  Assistant  Attorney General,  Natural  Resources                                                               
Section, Civil  Division (Juneau),  Department of  Law, explained                                                               
that the state does not get any  credit in terms of how much more                                                               
a  nonresident  is charged  for  taxes  that both  residents  and                                                               
nonresidents  pay.   It only  receives benefits  from taxes  that                                                               
residents pay  for service  which nonresidents  do not  also pay.                                                               
This  is how  [Alaska] can  take its  oil revenues,  for example,                                                               
which  pay for  services [for]  Alaskans.   If a  tax is  imposed                                                               
equally on residents  and nonresidents, it doesn't  come into the                                                               
formula at all.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  STEVENS  asked  Mr.  White to  comment  on  plans                                                               
regarding  the [Carlson]  court case  and what  he estimates  the                                                             
outcome will be.                                                                                                                
                                                                                                                                
Number 1640                                                                                                                     
                                                                                                                                
MR. WHITE replied that the [Department  of Law] filed a notice of                                                               
appeal before the supreme court several  weeks ago.  The state is                                                               
appealing the four budget  categories that Representative Stevens                                                               
mentioned earlier.   These are legitimate costs of  the state for                                                               
commercial  fishing   which,  if   put  into  a   formula,  would                                                               
substantially increase  the amount of differential  that could be                                                               
charged  nonresidents.    Furthermore, [CFEC]  is  appealing  the                                                               
issue about  whether any  refunds of permit  payments need  to be                                                               
paid to  nonresidents; it is  also appealing whether  [the state]                                                               
needs  to pay  interest on  this.   [The state]  has also  argued                                                               
other  technical  legal questions  such  as  whether this  is  an                                                               
appropriate class action  or if it should be limited  to only the                                                               
six people whose names are on the complaint.                                                                                    
                                                                                                                                
MR.  WHITE   explained  that  altogether  11   points  are  being                                                               
appealed.  He  is confident that at least  some budget categories                                                               
will be included  [in the formula].  The  superior court included                                                               
only  [the   state's]  direct   operational  costs   of  managing                                                               
commercial fisheries,  such as  salaries for  people in  CFEC and                                                               
the Division  of Commercial  Fisheries.   The superior  court did                                                               
include some overhead  costs for the department  [ADF&G], but did                                                               
not allow [the  state] to include capital  costs for constructing                                                               
fish   hatcheries,   harbors,    general   state   infrastructure                                                               
attributed to the population because  of commercial fisheries, or                                                               
the  subsidy to  hatcheries that  principally support  commercial                                                               
fisheries.  He expressed hope  that some of these categories will                                                               
be included.                                                                                                                    
                                                                                                                                
MR. WHITE  explained that if  all the budget categories  had been                                                               
included  at the  superior court  level,  the differential  would                                                               
have been $570 - more than  any of the current ranges for limited                                                               
entry permits.   [The  state] would  have been  "home free."   He                                                               
pointed  out if  [the state]  wins on  the interest  argument, he                                                               
believes the  [amount owed]  would be cut  from one-half  to two-                                                               
thirds because  [the state] has  accrued 10.5  [percent] interest                                                               
on payments back  to 1982.  Although  it is hard to  say what the                                                               
state's opportunities  to win on  those issues are, the  more the                                                               
state   wins,  the   more  the   [amount  owed]   will  go   down                                                               
proportionately, "to the possibility of not being at all."                                                                      
                                                                                                                                
REPRESENTATIVE  STEVENS  commented that  Mr.  White  has said  he                                                               
"will see this through to the end."                                                                                             
                                                                                                                                
Number 1425                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN stated,  "I  take an issue with the courts."                                                               
He went  on to  say that  the state passes  laws, and  the courts                                                               
should  be  there  to  determine  whether or  not  the  laws  are                                                               
reasonable  and legal.   He  expressed concern  about being  in a                                                               
"defensive  mode"  and  wondered  if   this  is  the  best  legal                                                               
approach.  He suggested that [the  state] be in an offensive mode                                                               
and  adopt what  the  attorney  general used  in  arguments.   He                                                               
added,  "We're  talking  about  saving  about  $1.1  million  for                                                               
another  year until  that determination  is  made, versus  either                                                               
22.5  million or  perhaps significantly  higher."   He said  this                                                               
seems to  be "pretty  reasonable," and said  perhaps it  would be                                                               
worthwhile to "arm you with the  support of the legislature."  He                                                               
indicated this would provide a  reason for the difference between                                                               
permit prices, and then [Mr.  White] could argue a stronger case,                                                               
that  "at  least it's  Alaska's  total;  it's  not just  a  legal                                                               
battle, but  it's the will of  the people who are  elected by the                                                               
people."                                                                                                                        
                                                                                                                                
Number 1336                                                                                                                     
                                                                                                                                
MR. WHITE commented that it  wouldn't affect the court's decision                                                               
if   this  legislation   names  and   includes  all   six  budget                                                               
categories.    The court  will  determine  on  its own  what  the                                                               
state's fisheries budget is, and  will use it based on principles                                                               
of  public  budgeting  processes.   He  mentioned  that  a  Ph.D.                                                               
economist,  who   is  also  a   legislator  from  the   state  of                                                               
Washington, had come to help present the case.                                                                                  
                                                                                                                                
MR. WHITE  said,  "That's  the kind  of economic theory  that the                                                               
courts  are going  to  be  looking at  to  determine what  budget                                                               
expenditures  should be,  and should  not be,  in this  formula."                                                               
Therefore, what  the legislature says  is going to  be irrelevant                                                               
for the  court's interpretation.   In fact, if  [the legislature]                                                               
includes all six budget categories, and  "we don't get all six of                                                               
them," then the statute will have  to be changed once again.  The                                                               
language in  HB 194 enables  [the state], in very  generic terms,                                                               
to  charge the  most that  the law  allows.   This will  become a                                                               
differential in  which, each  year, the amount  will change.   In                                                               
short, he  thinks this  is the  most efficient  way to  deal with                                                               
this case and still be able  to charge nonresidents the most that                                                               
is possible.                                                                                                                    
                                                                                                                                
REPRESENTATIVE GREEN again  expressed dissatisfaction with taking                                                               
a  defensive  posture  and  "back-peddling"  while  awaiting  the                                                               
court's  decision.   He said  that is  the wrong  way to  use the                                                               
court.                                                                                                                          
                                                                                                                                
MR.  WHITE  replied  that  the court  is  interpreting  the  U.S.                                                               
Constitution, not a  state statute.  It is beyond  "our" power to                                                               
affect what  [the court]  is actually looking  at.   Passing this                                                               
bill  will show  the Alaska  Supreme  Court that  the state  took                                                               
corrective action as soon as  the superior court ruled that there                                                               
was some  possible liability.   This will be helpful  because the                                                               
other side's  argument is that the  state has known for  18 years                                                               
that  it  has  been  charging   nonresidents  higher  fees.    He                                                               
indicated that the other side  believes that the state should pay                                                               
back  all  money  received  from  the  three-to-one  ratio,  plus                                                               
interest,  to all  nonresidents,  including those  that can't  be                                                               
located.                                                                                                                        
                                                                                                                                
MR. WHITE reiterated  that his argument to this would  be that as                                                               
soon as  it became  clear that  there was  some liability  to the                                                               
state,  the legislature  took the  appropriate steps  to adopt  a                                                               
basic formula into  statute.  In addition, steps  have been taken                                                               
to notify all the nonresidents so  they can continue to keep [the                                                               
state] informed of their whereabouts,  in case [the state] has to                                                               
pay them back.  The  bill, a good-faith effort, demonstrates that                                                               
the  state  is  acting  responsibly.   He  noted  that  the  U.S.                                                               
Constitution  says  all residents  and  nonresidents  have to  be                                                               
treated substantially the same when  pursuing a vocation in terms                                                               
of license  fees and so  forth; the  exception is, the  state can                                                               
charge more  for those services  it provides that are  based upon                                                               
taxes that only residents are paying.                                                                                           
                                                                                                                                
MR. WHITE added that the formula  says this.  He remarked that it                                                               
won't help  his argument to  go into  the supreme court  and say:                                                               
"The  legislature  thinks the  fisheries  budget  is composed  of                                                               
these factors, because  the supreme court is not  looking at what                                                               
the  legislature  does  in  terms   of  its  definitions  of  the                                                               
fisheries  budget," because  it is  a U.S.  constitutional issue.                                                               
"We are  being aggressive in terms  of attacking it in  every way                                                               
that we can," he concluded.                                                                                                     
                                                                                                                                
Number 0947                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GREEN requested  clarification about  the purpose                                                               
of the bill in relation to the legal case.                                                                                      
                                                                                                                                
MR. WHITE explained that the  bill stops interest from running on                                                               
potential future refunds,  and shows the court that  the state is                                                               
acting responsibly  in terms of  "pounding the argument  that the                                                               
state should  pay not  only all the  nonresidents out  there, but                                                               
also  all the  nonresidents that  we  can find."   The  [Carlson]                                                             
class  is arguing  that  the  State of  Alaska  has ignored  this                                                               
situation for  18 years.   He  said many  of these  class members                                                               
have "disappeared":   some addresses cannot be found  and some of                                                               
these people  are deceased.   He reiterated  that the  other side                                                               
believes the  State of Alaska should  pay "all the people  we can                                                               
find,  all the  people we  can't find,  ... [and]  also pay  that                                                               
money into  a fund or distribute  it amongst all the  rest of the                                                               
nonresidents."  This is an argument  he will face in court.  This                                                               
bill will help [the state] defeat  this argument and help to keep                                                               
the money  that otherwise might  have to  be paid for  people [in                                                               
the Carlson class] who can't be contacted.                                                                                    
                                                                                                                                
Number 0790                                                                                                                     
                                                                                                                                
REPRESENTATIVE STEVENS commented that  there are two major issues                                                               
here.   First,  the state  must move  away from  the three-to-one                                                               
ratio and  find a way to  begin charging the right  amount or the                                                               
most  that  can  possibly  be   charged  to  nonresidents,  since                                                               
liability is accruing.   He noted that he also  likes the idea of                                                               
sending a message to the court  saying, "By the way, we think all                                                               
of  these things  should count."    He mentioned  that Mr.  White                                                               
would say this bill does not  weaken this case and does not admit                                                               
any guilt on [the state's] part.                                                                                                
                                                                                                                                
REPRESENTATIVE STEVENS  pointed out  that many  people, including                                                               
himself  and Co-Chair  Scalzi, believe  [the legislature]  should                                                               
send a stronger statement to  the court.  However, this statement                                                               
should not  be included  in HB 194.   The bill  is an  attempt to                                                               
current the current situation.   He proposed, therefore, that the                                                               
House  Resources  Standing  Committee  come up  with  a  separate                                                               
resolution,  to  say that  the  legislature  opposes actions  the                                                               
courts have taken, and believes  all six budget categories should                                                               
be included [in the formula].                                                                                                   
                                                                                                                                
Number 0564                                                                                                                     
                                                                                                                                
CO-CHAIR SCALZI called  an at-ease at 2:38 p.m.   The meeting was                                                               
called back to order at 2:44 p.m.                                                                                               
                                                                                                                                
CO-CHAIR  SCALZI asked  Mr. White  to comment  on the  difference                                                               
between commercial and sport licenses.                                                                                          
                                                                                                                                
MR.  WHITE responded  that the  difference is  that pursuit  of a                                                               
livelihood  or  having   a  license  for  a   vocation,  such  as                                                               
commercial fishing,  brings the privileges and  immunities clause                                                               
from the  U.S. Constitution into consideration;  this clause says                                                               
there must be  substantial equality in the way  that one licenses                                                               
or treat  residents and  nonresidents.  This  is what  has driven                                                               
this case from the beginning.                                                                                                   
                                                                                                                                
MR. WHITE pointed out that  recreational pursuits such as hunting                                                               
and fishing, and  college tuition charges in  regard to residents                                                               
and nonresidents,  are not included in  this clause.  It  is more                                                               
permissive  for  states to  charge  more  [for nonresidents]  for                                                               
those pursuing non-vocational activities.   There was a challenge                                                               
in the courts  a few years ago concerning  the higher allocation,                                                               
by percentage, of moose to residents.   The concern was that this                                                               
was  unconstitutional.   However, the  courts said  since it  was                                                               
recreational and the  state constitution gives a  higher value of                                                               
resources  to  residents,  these   discriminations  in  favor  of                                                               
residents can be  made.  So, different parts  of the constitution                                                               
are  involved   when  dealing  with  recreation   as  opposed  to                                                               
vocation.                                                                                                                       
                                                                                                                                
Number 0346                                                                                                                     
                                                                                                                                
REPRESENTATIVE McGUIRE asked:  If  the supreme court reverses the                                                               
superior court's decision  and this bill is in  place, what would                                                               
the estimated lost revenue be?                                                                                                  
                                                                                                                                
MS.  McDOWELL  explained that  [CFEC's]  fees  would decrease  by                                                               
$470,000 in  FY 02.   But this  is not "actually  gone."   If the                                                               
state prevails at  the supreme court level, it  can be subtracted                                                               
from what is owed  to the plaintiffs.  There is  an offset due to                                                               
the stipulation  with the plaintiff's  attorney.  If  [the state]                                                               
loses at the supreme court level,  a refund would be owed to [the                                                               
Carlson  class], in  which case  [the state]  could subtract  the                                                             
undercharge.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  McGUIRE asked  what the  amount would  be if  the                                                               
state won  and didn't owe a  refund.  She said  [the legislature]                                                               
is passing  HB 194  because of  wanting to  prevent any  of those                                                               
future  costs  from  being  incurred  during  the  interim  while                                                               
awaiting the supreme court's decision.                                                                                          
                                                                                                                                
MS. McDOWELL answered that in  this interim, crewmember fees will                                                               
have been increased under provisions  of this bill, which recoups                                                               
most of  [the loss].  She  noted that ADF&G is  still calculating                                                               
the amount.                                                                                                                     
                                                                                                                                
REPRESENTATIVE McGUIRE  clarified that she has  been hearing from                                                               
colleagues that they don't like [the  bill], and don't want to do                                                               
it, "but  we're gonna do it  because ... it shows  the court good                                                               
faith and, by the  way, it's going to save money  in the event we                                                               
have to  pay out."   She said she didn't  "buy in" to  that good-                                                               
faith idea, because "if the court  isn't going to listen to us if                                                               
we go  back in and  change the policies  in our statute,  why are                                                               
they going to listen to us when  we go back and do something like                                                               
this?"  She questioned the validity  of saying, on one hand, that                                                               
the court will  listen to [the legislature], while  saying on the                                                               
other hand that it won't.                                                                                                       
                                                                                                                                
TAPE 01-25, SIDE A                                                                                                              
                                                                                                                                
REPRESENTATIVE McGUIRE referred to  the "saving money" element of                                                               
the  bill and  said  it's  "an additional  potential  task if  we                                                               
lose."    She  wondered  about the  benefits  and  setbacks,  and                                                               
mentioned that  under the current  statute, $1.13 million  may be                                                               
lost.   However, this amount  also has to  be offset by  the fact                                                               
that "we're going  to be losing some revenues that  we would have                                                               
continued  to collect  under  the  current statutory  framework."                                                               
She  said she  feels this  is a  "cart before  the horse  kind of                                                               
thing."   It is an  unusual way of  dealing with this  issue, and                                                               
she  was not  sure whether  she had  even seen  a situation  like                                                               
this, except perhaps in the Kasayulie case.  She continued:                                                                   
                                                                                                                                
     I would  feel much  more comfortable waiting  until the                                                                    
     highest court  rules and  take their  message, whatever                                                                    
     it is, and reincorporate it  into our statutes and make                                                                    
     sure that  we have  it right.   I  do not  believe that                                                                    
     judges live  in a box.   I  think that they  hear, they                                                                    
     listen, they  know what's  going on  around them.   I'm                                                                    
     not saying  it influences  them one  way or  the other.                                                                    
     But  they certainly  aren't  quarantined  up until  the                                                                    
     date in which  the decision is made, and  I wonder what                                                                    
     message we're  sending by changing this  at this point.                                                                    
     I just feel like it might be premature.                                                                                    
                                                                                                                                
REPRESENTATIVE  McGUIRE  remarked  that  the  fiscal  notes  were                                                               
creative.   She said she  has never seen  a zero fiscal  note for                                                               
something that "clearly has fiscal consequences."                                                                               
                                                                                                                                
CO-CHAIR  SCALZI  remarked  that   the  fiscal  note  contains  a                                                               
$470,000 change in revenue.                                                                                                     
                                                                                                                                
REPRESENTATIVE  McGUIRE  stated  that this  is  an  indeterminate                                                               
section.   She would  not hold  the bill,  but wonders  if "we're                                                               
just rolling over here."    She then requested the answers to her                                                               
questions regarding the revenue difference.                                                                                     
                                                                                                                                
Number 0246                                                                                                                     
                                                                                                                                
JERRY McCUNE, United  Fishermen of Alaska (UFA),  came forward to                                                               
testify.  He said, "You lost  some aspects of this case already."                                                               
No  matter  what the  legislature  says,  the three-to-one  ratio                                                               
portion is gone.   He mentioned that he has  heard many questions                                                               
concerning  the interest  that would  have  to be  paid out  this                                                               
year, under  the current  situation; if  [the court]  orders [the                                                               
state] to  pay back  all of  the nonresidents,  it would  be $1.5                                                               
million  for  interest accrued  at  10.5  percent.   He  reminded                                                               
members  that  if  Mr.  White is  successful  at  "knocking  that                                                               
interest rate  down or knocking it  off, then yes, you  might not                                                               
have to pay that $1.5 million."                                                                                                 
                                                                                                                                
MR. McCUNE  reported that after  much discussion, UFA  has agreed                                                               
to increase  the resident fees on  the "high-end cap" to  $300, a                                                               
20 percent  increase.  United  Fishermen of Alaska  represents 26                                                               
groups in  the state.   They agreed to the  bill so that  some of                                                               
the funding  that has been taken  in could be recouped.   He said                                                               
if "we" win  the four [budget categories] in court,  then all six                                                               
[budget   categories]  will   be  counted   to  offset   the  fee                                                               
differential, which  will enable [Alaska] to  charge nonresidents                                                               
more.   He went on  to say, "So  we'll be  able to come  close to                                                               
where we were  before, which is the agency usually  brings in 4.8                                                               
million and  [the agency] takes  about 2.4  million to run."   He                                                               
noted that UFA's support would  not insulate [the committee] from                                                               
having people  still call, because  he couldn't make  7,500 phone                                                               
calls to  inform people about this  case.  He mentioned  that UFA                                                               
has  also  attempted  to  contact   non-UFA  members  about  this                                                               
situation.                                                                                                                      
                                                                                                                                
Number 0492                                                                                                                     
                                                                                                                                
KEVIN  BROOKS,  Director,  Division of  Administrative  Services,                                                               
Alaska Department of  Fish & Game, said in regard  to the higher-                                                               
end licenses  for commercial crewmembers, the  differential sends                                                               
it  "in  the  negative   direction."    Historically,  crewmember                                                               
licenses   have   been  $30   [for   residents]   and  $90   [for                                                               
nonresidents], but  now it is  $90 and $125, respectively.   This                                                               
$65  difference  is less  than  any  differential that  has  been                                                               
contemplated.   So, under the  terms of  HB 194 that  would allow                                                               
[the state]  to charge this  differential, more revenue  could be                                                               
generated on the crewmember side.   This money is currently being                                                               
used in the fisheries budget to "the tune of about a million."                                                                  
                                                                                                                                
MR. BROOKS  explained that  the fee-supported  services generated                                                               
from  the  limited  entry  permits are  also  in  the  commercial                                                               
fisheries  budget to  the "tune"  of about  a $1.4  million.   He                                                               
indicated  reductions   could  be   offset  by  an   increase  in                                                               
nonresident crewmember licenses.  He said this is "late-                                                                        
breaking,"   because  they   had  been   thinking  about   damage                                                               
assessment,  which  meant  considering   things  such  as  vendor                                                               
compensation and  contributions made  to the fishermen's  fund by                                                               
statute out  of this revenue.   He noted that [ADF&G]  is working                                                               
on this,  and said a  fiscal note would  be attached to  show the                                                               
increase of revenue "on the crew."                                                                                              
                                                                                                                                
MR.   BROOKS   reiterated  that   currently   there   is  a   $65                                                               
differential.  Based on the formula  that has been looked at, the                                                               
average for the  last four years would be $111.   So, potentially                                                               
a nonresident  crewmember could  be charged  $171 instead  of the                                                               
current  $125  if  [the  state]   prevailed  on  all  six  budget                                                               
categories.   He asked:   If  in one  year that  differential was                                                               
$570, would  the crewmember be  charged $60  plus that $570?   He                                                               
said, "At  some point, enough's  enough.   Maybe $170 is  not too                                                               
much.  My gut tells me $630 is probably too much to charge."                                                                    
                                                                                                                                
CO-CHAIR SCALZI stated that he  appreciated [ADF&G's] work on the                                                               
figures and attempts to make it equitable.                                                                                      
                                                                                                                                
Number 725                                                                                                                      
                                                                                                                                
REPRESENTATIVE STEVENS  remarked that he  would like the  bill to                                                               
be  moved out  of the  House Resources  Standing Committee  along                                                               
with  Representative  Green's  idea concerning  a  resolution  to                                                               
accompany the bill to make a stronger statement.                                                                                
                                                                                                                                
REPRESENTATIVE  GREEN commented  that Representative  Stevens has                                                               
offered the  fact that "they  have quite  a file on  this," which                                                               
would  help  in writing  a  resolution.    He  said it  would  be                                                               
possible  to have  a  resolution for  the  committee's review  by                                                               
Monday.                                                                                                                         
                                                                                                                                
CO-CHAIR  SCALZI asked  Representative  Stevens if  he wanted  to                                                               
wait for the resolution to move the bill out of committee.                                                                      
                                                                                                                                
REPRESENTATIVE  STEVENS  replied  that he  would  be  comfortable                                                               
passing the  bill out  as long  as the  committee is  planning to                                                               
have a resolution.   He noted that "we" would  put the resolution                                                               
together and show  it to Representative Green to make  sure it is                                                               
what he wants.                                                                                                                  
                                                                                                                                
Number 846                                                                                                                      
                                                                                                                                
REPRESENTATIVE  MCGUIRE made  a motion  to move  HB 194  from the                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal notes.   There being no  objection, HB 194 was  moved from                                                               
the House Resources Standing Committee.                                                                                         

Document Name Date/Time Subjects