Legislature(1999 - 2000)
04/21/1999 08:07 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 146(FIN)
"An Act relating to the amount and disposition of the
commercial fishing license fee and to the fishermen's
fund; and providing for an effective date."
This was the first hearing for this bill.
Co-Chair John Torgerson explained that this bill would
increase the commercial fisheries crewmember license fees
from $30 for residents to $60 and $90 for nonresidents to
$125. It would also change the percent of money that was
deposited into the fisherman's fund from 60 percent to 36
percent and require that all funds be deposited into the
fish and game fund.
Co-Chair John Torgerson spoke to his proposed Amendment #1.
This would clarify that the legislation would apply only to
crewmember licenses rather than all commercial fishing
licenses.
Senator Al Adams moved to adopt Amendment #1. It was
adopted without objection.
KEVIN BROOKS, Director, Division of Administrative
Services, Department of Fish and Game testified. The
department worked with the co-chair on this bill and
appreciated the efforts to assist with the budget
reductions.
There were a couple items on the bill he wished to work
with staff to fix. Co-Chair John Torgerson informed him the
bill would be reported out of committee this meeting.
Kevin Brooks voiced the department's concerns shared with
the Department of Labor, who administered the fisherman's
fund. They did not want to jeopardize the dedication of the
fund. He realized it was stated in the language of the
bill. The Department of Law warned that the change in the
percentage allocation would need to be addressed to ensure
the fund was not compromised.
Co-Chair John Torgerson had the same conversation with the
Department of Law and had done research himself and he did
not believe there was a problem with the dedicated funds.
He had researched the minutes of the Constitutional
Convention, which stated that a change in the rate was not
supposed to change the properties that set it up as a
dedicated fund. He was aware there were attorney general
opinions that found in favor of both sides of the issue.
The most recent opinion stated that the change in rate did
not affect the constitutional dedication.
Kevin Brooks then brought up the second concern. The
department wished to maintain the cost differential between
the two licenses. Currently, it was sixty-dollar
differential.
Co-Chair John Torgerson informed the committee that there
was a test that dictated what differential could be charged
to nonresidents. It was his understanding that the fee of
$125 did not exceed that and was suggested by the Division
of Legislative Finance after they applied the formula.
Senator Al Adams noted that this bill would double the fee
for Alaskan fishermen but did not do the same for out-of-
state crewmembers. He felt if the rates were to be raised
for in-state crewmembers, it should be raised for out of
state crewmembers at the same rate as well. His reason was
because Alaskans paid for state services such as water and
sewer facilities while out-of-state crewmembers did not.
Co-Chair John Torgerson said that was his original intent.
However, after discussions with the Division of Legislative
Finance and the Division Legal Services, he learned that
even the current differential did not fit the formula. If
the bill raised the nonresident fee higher than $125 then
they would be in violation of the Interstate Commerce
Clause.
Senator Dave Donley pointed out similar formulas that went
as high as a four-to-one ratio on the East Coast had
survived challenges in the US Supreme Court. He understood
that there was another side to that test regarding the
actual cost relationship.
Co-Chair John Torgerson detailed the formula was the total
amount of money spent on commercial fisheries divided by
all the residents. That number could not be three times
higher that what was charged residents. He stated that was
a federal law.
Senator Dave Donley argued that it was not a federal law,
it was a court interpretation of the US Constitution. He
did not feel it was an absolute rule. He suggested the
Division of Legal Services testify to why they advised as
they did. He suggested it was one thing to design a law
that would never lose and another to design a law to where
it should be when there was a gray area.
Senator Dave Donley agreed with Senator Al Adams and noted
the other benefits that the out of state crewmembers had
besides the cost of running the specific fishery. The
state provided basic infrastructure, roads, etc.
Co-Chair John Torgerson read into the record the legal
opinion given by the Division of Legal Services based on
the Alaska Supreme Court ruling in Carlson vs. the State Of
Alaska. "The court had determined that the fees paid by
nonresident commercial fishermen may not exceed the total
of the fee paid by a resident plus the per capita amount of
in state taxes used by the state to support fish management
and commercial fisheries. The Carlson case interpreted the
privileges and immunity clause of Article 9 Section 2 of
the federal constitution. The privileges and immunities
clause allows the person to pursue a livelihood in any
state without unjust discrimination based on the person's
state of residence." "The per capita cost to the state
commercial fisheries program is determined by dividing the
total amount of state expenditures for commercial fisheries
programs by the number of residents of the state." He
offered to share the entire opinion with the committee.
Senator Dave Donley stated it was his opinion that the
Supreme Court decision interpreted the US Constitution. If
that was the state court's decision, it was not the final
ruling. He believed that ruling was wrong in that it did
not consider the other state expenditures that supported
the industry. He gave more examples of municipal revenue
sharing and other infrastructure costs. He felt there was a
legitimate public policy argument. It was a gray area and
he admitted he could be wrong. But he agreed with Senator
Al Adams that under a fairness issue, the state had a
stronger argument.
Co-Chair John Torgerson did not disagree. However, he did
not want to have the bill subject to challenge.
Kevin Brooks shared his discussions with the Department of
Law. It was explained to him that all commercial fishing
licenses were considered not just the crewmembers licenses.
The test was applied to the total nonresident licenses.
Other licenses had a greater discrepancy and were subject
to court challenge. He guessed that the state would end up
reimbursing some crewmembers.
Senator Al Adams asked what was the maximum amount that
could be charged to stay within the court decision. Kevin
Brooks answered that the formula was more complex than the
co-chair alluded to. He detailed the commercial fisheries
census and the use of oil revenue figures. Therefore it was
difficult to give an exact figure.
Senator Al Adams noted a conflict of interest due to his
holding of a limited entry permit. Senator Loren Leman
noted the same. He didn't feel this was the same as the
crewmember license provision in this bill. Co-Chair John
Torgerson objected to both members' motions to be allowed
to abstain from voting.
Senator Gary Wilken wanted to know if there was an age
limit that required an eight-year old to buy a license.
Kevin Brooks said there was no age limit. Anyone who fished
on a commercial fishing vessel was required to hold a
crewmember license. However, many felt it was a form of
insurance since the permit covered the cost of medical
services through the fisherman's fund.
Senator Gary Wilken asked if they did not purchase the
license if they were excluded from use of the medical
services and facilities. Kevin Brooks was not definite,
but believed that was true. Senator Gary Wilken requested
that information provided to him in the future.
Kevin Brooks added that when looking at the upper amount
that might be charged an unintended result could be that
the crewmember license could be higher than the limited
entry license itself. The law stated that a crewmember
license was not required for a holder of a limited entry
license. Therefore, there was a possibility that some would
chose to purchase the lower cost, limited entry license
instead.
Co-Chair John Torgerson had researched that earlier. He
asked if the limited entry license applied to only one
person on the vessel. Kevin Brooks said that was correct,
as the skipper would usually have the limited entry permit.
However, the crew could have license for different
fisheries such as for a herring fishery, etc.
MARY MCDOWELL, Commercial Fisheries Limited Entry
Commission, testified that limited entry permits ranged in
renewal prices from $50 to $150 for residents. Anyone could
purchase the lower priced permits, which were for unlimited
fisheries. Therefore, there could be some motivation to buy
a $50 permit rather than the $60 crewmember license.
Co-Chair John Torgerson so the $50 fee was available to
anyone regardless of what they were fishing. Mary McDowell
answered that the unlimited fishery permit could be used to
crew in any fishery.
Co-Chair John Torgerson asked if vendors sold both
licenses. Mary McDowell replied they only sold the
crewmember licenses. Co-Chair John Torgerson wanted to
know how would someone purchase the less expensive permit.
Mary McDowell said that would have to be purchased by mail.
Co-Chair John Torgerson than wanted to know if there were
any plans to sell the permits by vendors. Mary McDowell
answered no. Kevin Brooks noted the reason for raising the
issue was because there were no estimates on how many
licenses could be affected.
Kevin Brooks added another concern relating to the
dedication of the revenues to the fish and game fund. The
Department of Law suggested changing the word in Section 4
from "deposit" to "appropriated". He felt that language
would be more appropriate. Co-Chair John Torgerson had
heard that argument but if the funds would then go to the
general fund and it was not his intent to do that. Kevin
Brooks said it was his understanding that the funds would
be appropriated from the general fund to the fish and game
funds.
Senator Al Adams suggested making the change on page 2 line
24 to read, "shall be appropriated into the general fund to
the fish and game fund." which should solve the budget
concerns. He understood the relationship to the operating
budget.
Co-Chair John Torgerson asked it the Legislature
appropriated or deposited the current forty-percent that
went into the fund. He determined that went into the
general fund and was appropriated. Kevin Brooks believed
the remaining sixty-percent was deposited.
Co-Chair John Torgerson wanted to know why the department
wanted to change this.
JIM BALDWIN, Assistant Attorney General, Governmental
Affairs Section, Department of Law, answered that the part
that was dedicated did not have to be appropriated. The
part that went to the general fund went there
automatically. He was unsure if that would change the
general funds appropriation level. It would be similar to
oil and hazardous substance surcharge fees. They were not
considered general fund receipts, but were anticipated in
the front section of the budget that once they were
received, they were appropriated. It would take another
appropriation at a later date for expenditure.
Co-Chair John Torgerson said he would ask the Legal
Services Division and the Division of Legislative Finance
for an opinion on this matter.
Kevin Brooks noted another item was with the fifteen-
percent vender surcharge. He did not know if the intent of
this legislation was to adjust that amount since it
concerned a much higher dollar amount. Co-Chair John
Torgerson noted the surcharge was a regulation not a
statute. Kevin Brooks said he would have to check. Co-
Chair John Torgerson suggested lowering the percentage.
AT EASE 8:34 AM / 8:37 AM
Co-Chair John Torgerson noted a call was being made to the
Division of Legislative Finance for advice on the
appropriation vs. deposit issue.
Jim Baldwin testified. For the record, he stated that he
had worked with the co-chair before this meeting. He felt
some of the concerns raised by the department were worth
consideration.
There had been some confusion over the years, in the
department's opinion, on the dedicated funds issue. In
particular, changes in the rate of dedication on the pre-
existing dedicated funds-those funds that pre-dated
statehood and were continued under Article 9 of the Alaska
Constitution.
Most recently, the department dealt with this in connection
with tobacco tax. Part of the tax was dedicated. When
addressed in this committee during the last Legislature,
the Division of Legal Services took the position that there
was evidence in the minutes of the constitutional
convention to support an interpretation that a rate of
dedication could be changed. That was done in this bill
with the rise of the fee and the lowering of the rate. The
intent was that no more was being dedicated than what was
in existing law. Therefore, there was not a change in the
rate of dedication. The Department of Law opinion regarding
the tobacco settlement at the time was that a change in
rate would threaten a continuance of the dedicated funds.
They advised installing back-up provisions in the bill to
remove incentive to litigate and make it clear where the
funds would go in the case of successful litigation.
Another approach that had been used successfully in the
area of tobacco tax was to send money to another place
rather then dedicate. This would really impose an
additional fee in a separate area and leave the dedication
as is. He suggested doing this for the fish and game fund,
which would avoid the issue altogether. He understood the
committee might want to be consistent with the tobacco tax
law. However, he warned there may be risks. The department
would defend the actions, he assured.
Senator Randy Phillips wanted to know how effectively the
Department of Law would defend the Legislature's actions.
Co-Chair John Torgerson said the reason he had worked with
the Department of Law earlier was to avoid the perception
of "smoke and mirrors". He had considered a surcharge but
preferred this method He intended for the fees to offset
the cost of commercial fishing in the state. It would be
cleaner if the fees went through the fish and game funds
and came out again in commercial fisheries expenditures.
He referred to page 7 of the legal opinion issued by George
Utermohle of the Legal Services Division, which addressed
the dedicated rate in the form of gasoline taxes. The
Chairman of the Finance Committee of the Constitutional
Convention stated the intent did not have any reference to
rates. The convention finance committee intended that this
applied to the allocation of particular taxes to a
particular purpose.
Senator Dave Donley wanted to know if the Department of Law
argued the Carlson case. Jim Baldwin said it had although
he had not handled it personally. Senator Dave Donley
wanted a copy of the brief to the Supreme Court.
Kevin Brooks made a follow-up comment on the fifteen-
percent surcharge. This was governed by statute AS
16.05.470(a). He recommended setting the figure at ten
percent.
Co-Chair John Torgerson had asked for a breakdown of
tickets sold by month to determine the best effective date
of the bill. Kevin Brooks had provided that information to
staff and detailed that most revenues were generated during
January and February. Therefore, an effective date of
January 1, 2000 would capture revenues.
Co-Chair John Torgerson wanted to know why the department
recommended against an effective date of June this year.
Kevin Brooks responded that because many permits were
already issued and the vendors were distributed the current
forms and information, there would be hardship in
retrieving the permits to replace with the new. Co-Chair
John Torgerson understood the argument and agreed.
Senator Loren Leman noted Mary McDowell talked about the
possibility of crewmembers choosing to purchase a limited
entry license rather than a crewmember license. There was
a benefit of an insurance fund to those who did not have
other insurance. Was that fund also available to those who
purchased the limited entry permit? Kevin Brooks said it
was. Senator Loren Leman wanted an incentive to keep people
from purchasing the permit instead.
At Ease 8:50 AM / 9:00 AM
Co-Chair John Torgerson said discussions showed that
changing the word "deposit" to "appropriated" would not
make that much difference. David Teal, Director, Division
of Legislative Finance was present to answer specific
questions.
Senator Loren Leman moved conceptual Amendment #2. This
would apply to AS 16.05.470(a) and change the vendor
surcharge from fifteen-percent to ten-percent. It would
also change page 2 line 24 to delete "deposited" and insert
"appropriated." Without objection, it was adopted.
Senator Dave Donley made a motion to move from committee SB
146 (FIN). Co-Chair John Torgerson noted the department
would have fiscal notes later in the day that would show an
increase in the revenue component to reflect the changes
from Amendment #2. There was no objection and the bill
moved from committee.
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