Legislature(2017 - 2018)BUTROVICH 205

04/16/2018 03:30 PM Senate RESOURCES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHCR 23(RES) Out of Committee
-- Public Testimony --
Moved CSHJR 29(FIN) Out of Committee
-- Public Testimony --
Moved CSHB 197(FIN) Out of Committee
-- Public Testimony --
Moved HB 354 Out of Committee
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                HB 354-DIVE FISHERY ASSESSMENTS                                                                             
4:00:27 PM                                                                                                                    
CHAIR  GIESSEL announced  consideration  of HB  354 [version  30-                                                               
LS1368\D, was before the committee].                                                                                            
REPRESENTATIVE  DAN  ORTIZ,  sponsor  of  HB  354,  Alaska  State                                                               
Legislature, said  this measure streamlines the  process in which                                                               
the   Southeast  Alaska   Regional  Dive   Fisheries  Association                                                               
(SARDFA)  can  amend  an  assessment.   SARDFA  is  a  non-profit                                                               
association that  represents all  dive fishery permit  holders in                                                               
the  Southeast commercial  fishing region.  It is  the only  dive                                                               
fishery   association   in   the   state   regulated   under   AS                                                      , and current statutes  require a majority of permit                                                               
holders to participate in an election to modify an assessment.                                                                  
He  explained  that due  to  the  Southeast Alaska  dive  fishery                                                               
becoming  a limited  entry  fishery  in the  1990s,  many of  the                                                               
permits are  non-transferrable and  are no longer  actively being                                                               
fished.  The   proposed  legislation  allows  for   a  change  in                                                               
assessment to be initiated by  a three-fourths vote of the SARDFA                                                               
board and passed with a  majority of permit holders participating                                                               
in an election.                                                                                                                 
REPRESENTATIVE  ORTIZ  explained  that   this  bill  changes  the                                                               
existing  way  SARDFA  conducts assessments  on  their  different                                                               
fisheries.   Their  fishermen   are  assessed   to  fund   Alaska                                                               
Department of  Fish and Game  (ADF&G) activities to  manage those                                                               
fisheries.  The  problems  is  that  originally,  the  assessment                                                               
required  a  majority of  permit  holders  to participate  in  an                                                               
election  and  there  is less  and  less  participation,  because                                                               
people are aging out of the fisheries.                                                                                          
CHAIR GIESSEL asked staff to go through the bill.                                                                               
LIZ  HARPOLD,   staff  to  Representative  Ortiz,   Alaska  State                                                               
Legislature,  explained  that  HB  354  essentially  changes  the                                                               
threshold for initiating  a change and also  electing that change                                                               
in an assessment.                                                                                                               
Section 1 adds language to  clarify which sections the assessment                                                               
is levied, amended, and terminated.                                                                                             
Page  1, lines  7-10,  clarify  that it's  a  majority of  permit                                                               
holders  versus  participating  in   an  election  instead  of  a                                                               
majority of all permit holders total.                                                                                           
Page  1,  lines 11-12  create  the  minimum threshold  of  permit                                                               
holders being required to participate at 25 percent.                                                                            
Section 2  on page 2,  line 4, is conforming  language reflecting                                                               
the changes made in section 1.                                                                                                  
She pointed out  that AS 43.76. sections (a)-(d) have  to do with                                                               
the  notice  for  election,  the  election  procedures,  and  the                                                               
certification of  results. Adding subsection (b)  reiterates that                                                               
levying, amending, or terminating an  assessment must pass with a                                                               
majority of  permit holders participating  in an election  with a                                                               
minimum of 25 percent participation.                                                                                            
Sections  3  and  4  change  how the  amendment  of  (3)  or  the                                                               
termination of (4) an assessment  is initiated. So, instead of it                                                               
being brought  forward to the  commissioner of the  Department of                                                               
Revenue (DOR) by 25 percent  of the fishermen who participated in                                                               
the   previous  election,   the  initiation   of  changing   this                                                               
assessment will be brought forward  by the three-quarters vote of                                                               
the board of directors.                                                                                                         
4:05:22 PM                                                                                                                    
SENATOR  WIELECHOWSKI  asked  what   a  dive  fishery  management                                                               
assessment is.                                                                                                                  
REPRESENTATIVE ORTIZ  answered it  is a  tax that  is put  on the                                                               
value of, for example, the sale  of geoduck that goes directly to                                                               
the Department of  Revenue (DOR) that disburses it  to the Alaska                                                               
Department of Fish and Game (ADF&G)  so it can continue to manage                                                               
that particular  fishery, in this  instance the  geoduck fishery.                                                               
No general funds are used; it's all their own money.                                                                            
SENATOR WIELECHOWSKI asked  if industry is setting  its own rates                                                               
of taxation.                                                                                                                    
REPRESENTATIVE  ORTIZ replied  yes,  but like  any other  fishing                                                               
industry, they  want to  see preservation of  the stocks  for the                                                               
future, so they  can continue being part of the  economy. The tax                                                               
is based on what ADF&G sees itself needing to manage the stocks.                                                                
4:07:03 PM                                                                                                                    
SENATOR WIELECHOWSKI asked what the money is used for.                                                                          
REPRESENTATIVE ORTIZ replied  that the money is used  by ADF&G to                                                               
assess the stocks through a variety of ways.                                                                                    
SENATOR  WIELECHOWSKI asked  what  if  ADF&G says  it  needs a  5                                                               
percent tax and  people say no, it should be  4 percent. Can they                                                               
set a lower rate?                                                                                                               
REPRESENTATIVE   ORTIZ  replied   yes,   theoretically;  but   if                                                               
fishermen want their  stocks to be managed, they have  to pay for                                                               
SENATOR  BISHOP  commented that  at  end  of  the day,  the  dive                                                               
fishery funds the department to  assess whether it has an opening                                                               
or not.                                                                                                                         
REPRESENTATIVE ORTIZ replied yes.                                                                                               
SENATOR  STEDMAN  said this  tax  is  in  addition to  the  state                                                               
fisheries tax, but this is  the direction they want industries to                                                               
go: to be  self-supporting and not rely on the  general fund. The                                                               
challenge is if they hit the  score a little high and the revenue                                                               
needs adjusting.                                                                                                                
4:10:45 PM                                                                                                                    
SENATOR MEYER  asked if the  industry in Southeast is  healthy in                                                               
general. Should we maintain it or make it stronger?                                                                             
4:11:13 PM                                                                                                                    
SCOTT KELLEY, Director, Division  of Commercial Fisheries, Alaska                                                               
Department  of Fish  and Game  (ADF&G), answered  that the  three                                                               
fisheries - sea  urchins, cucumbers, and geoduck clams  - are all                                                               
healthy. Those fisheries have generated $8.5-12.5 million in ex-                                                                
vessel value.                                                                                                                   
SENATOR WIELECHOWSKI  asked if the department  supports this bill                                                               
and how  the amount of  funding has worked  so far. What  is done                                                               
with the excess funds?                                                                                                          
MR. KELLEY  replied that the assessment  goes to the DOR  and the                                                               
ADF&G gets  just a small piece  of that through what  is called a                                                               
"cooperative  agreement."  Their  piece   of  the  assessment  is                                                               
relatively small and the most of  it goes to the dive fishery for                                                               
water testing, and staffing. He  added that these fisheries can't                                                               
happen by  regulation unless the  stocks are assessed.  He brings                                                               
that  up because  that motivates  the association  to fund  ADF&G                                                               
operations. The department is currently adequately funded.                                                                      
SENATOR WIELECHOWSKI  asked how  much is  collected and  how much                                                               
goes to each department.                                                                                                        
MR.  KELLEY replied  that the  Division  of Commercial  Fisheries                                                               
receives  about   $104,000  per   year  from  the   dive  fishery                                                               
assessments and he didn't know how that broke down.                                                                             
SENATOR WIELECHOWSKI  asked if he  supported this measure  and if                                                               
the department  has sufficient  funds to  continue doing  what he                                                               
wants to do.                                                                                                                    
MR. KELLEY  replied that the  department supports this  bill, but                                                               
in  a way,  it is  an internal  matter for  the association.  The                                                               
ADF&G commissioner  is only charged with  certifying the election                                                               
and making sure the statutory voting requirements are followed.                                                                 
4:15:35 PM                                                                                                                    
SENATOR  STEDMAN commented  that legislators  had worked  on this                                                               
dive fishery  for years. It's nice  to see that it  is successful                                                               
and that outside of the sea otter predation problem, it is self-                                                                
CHAIR GIESSEL  remarked that  geoducks are  highly sought  in the                                                               
MR. KELLEY replied that is  true and that sometimes live geoducks                                                               
go for $11.50 a pound; processed  ones are worth about 65 cents a                                                               
SENATOR WIELECHOWSKI  asked if he  could have his  question about                                                               
the assessments answered.                                                                                                       
KEN ALPER,  Director, Tax Division, Department  of Revenue (DOR),                                                               
replied that the  value of the assessment is a  percentage of the                                                               
value and  it varies from year  to year. Part of  the reason this                                                               
is an  issue is that the  sea cucumbers are having  somewhat of a                                                               
boom and have contributed more  money through the assessment than                                                               
is  needed  and   are  struggling  to  reduce   the  rate.  Total                                                               
collections  in recent  years from  the three  dive fisheries  is                                                               
SENATOR WIELECHOWSKI said he thought  he heard ADF&G testify that                                                               
they need about $104,000 and that they are getting much more.                                                                   
MR. ALPER  replied that  the Tax  Division's role  is mechanical;                                                               
they are  collecting the  assessment alongside  all of  the other                                                               
fish   taxes.  It   is  designated   general   fund  subject   to                                                               
appropriation. Put  into context, it  is similar to  the hatchery                                                               
and  Alaska Seafood  Marketing Institute  (ASMI) assessments.  He                                                               
understands that  SARDFA is accumulating something  of a "reserve                                                               
account" that  they are  funding their  own operations  to manage                                                               
their fishery from their end, but  it's in a pot where they can't                                                               
just use it, and  they have more than they need.  That is part of                                                               
why they want to reduce the assessment.                                                                                         
SENATOR  WIELECHOWSKI  said  he  knows  some  fishery  funds  are                                                               
dedicated and  asked if  the excess money  goes into  the general                                                               
fund, and if he sees it diminish there.                                                                                         
MR. ALPER  answered these three  fisheries' funds  are designated                                                               
general fund and are intended  to be within the state's dedicated                                                               
funds   restrictions,   meaning   they  are   approved   by   the                                                               
legislature, and  to a certain  extent, the assessment has  to be                                                               
approved by  the user group  in a  vote. He understands  that has                                                               
been  upheld so  long as  the money,  itself, remains  subject to                                                               
SENATOR WIELECHOWSKI  asked if  that is  an appropriation  to the                                                               
general fund, because he said it was "dedicated."                                                                               
MR. ALPER replied if he said that  word, it was in the context of                                                               
avoiding  any linkage  to a  dedicated fund.  This is  considered                                                               
designated  general  fund (DGF)  within  the  revenue system.  It                                                               
comes in with  the expectation that it's going to  a purpose that                                                               
is subject to appropriation annually.                                                                                           
SENATOR  WIELECHOWSKI  asked  what  is  happening  to  the  other                                                               
MR.  ALPER replied  that his  understanding  is that  it goes  to                                                               
SARDFA,  which  is  a  non-profit,  and  sits  in  their  reserve                                                               
account. That  is why they want  to reduce the assessments  for a                                                               
couple of years while they spend it down.                                                                                       
SENATOR MEYER asked him to  explain the indeterminate fiscal note                                                               
that says additional revenue may come to the state.                                                                             
MR. ALPER replied that he didn't  have the fiscal note before him                                                               
but  there   had  been  several  versions.   Originally,  it  was                                                               
indeterminate and  then was  changed to zero.  The reason  it was                                                               
indeterminate  is that  this bill  might make  it easier  for the                                                               
fishermen user group to reduce  their rate, and therefore, reduce                                                               
the  direct  flow of  cash  to  the  state. However,  dollar  for                                                               
dollar, whatever comes in reduces  the amount that passes through                                                               
to the  user group, and  the net  effect regardless of  that rate                                                               
will be zero in regard to budgeting the state's revenue.                                                                        
SENATOR MEYER  said it  seems that as  this industry  grows, they                                                               
might generate a lot of funds  that the state could use for other                                                               
fisheries, but that was a discussion for another time.                                                                          
MR.  ALPER responded  that the  self-assessment for  dive fishery                                                               
management is in  addition to the traditional  fisheries tax that                                                               
all  Alaska's  commercial fishermen  pay,  which  is all  general                                                               
fund-shared  with  the  municipality.  This was  added  at  their                                                               
request to support  their own operations, and to  the extent that                                                               
their fishery  grows, ADF&G's costs  are going to  increase, too.                                                               
He believes that compared to salmon  in a creek, it costs more to                                                               
assess  these fisheries.  It is  more capital  intensive, because                                                               
divers  have to  be sent  down to  figure out  the health  of the                                                               
fishery and what sort of openers they can have.                                                                                 
SENATOR MEYER  remarked they  have to deal  with the  sea otters,                                                               
MR. ALPER declined to touch that.                                                                                               
4:23:41 PM                                                                                                                    
CHAIR  GIESSEL,  finding  no  further  questions,  opened  public                                                               
PHIL DOHERTY, Executive Director,  Southeast Alaska Regional Dive                                                               
Fisheries Association  (SARDFA), Ketchikan, Alaska,  supported HB
354. The  association, working with the  sponsors, generated this                                                               
legislation through  the board of  directors, their  two reactive                                                               
fisheries  committees  - the  geoduck  clam  and the  sea  urchin                                                               
fisheries - and the sea  cucumber committee. Through all of those                                                               
steps, they  did not have a  negative vote. SARDFA wants  this to                                                               
He explained that the three  fisheries have a mandatory tax above                                                               
and  beyond  the   3  percent  state  fisheries   tax.  They  tax                                                               
themselves 5 percent  of the sea cucumber and red  sea urchin ex-                                                               
vessel value and  7 percent of the geoduck  clam ex-vessel value.                                                               
They enter, under  regulation, an annual operating  plan with the                                                               
ADF&G. Then sit  down at the table with them  and discuss what is                                                               
needed  for  the  upcoming  year for  assessments  of  the  three                                                               
species  and agree  on that.  Then SARDFA,  through these  taxes,                                                               
pays  the  ADF&G  to  manage  and  do  the  assessment  work  and                                                               
necessary research  on the three  species.  This is  done through                                                               
the regulatory  process on any  given year.  If they do  not give                                                               
ADF&G  the   necessary  funds  for  them   to  conduct  research,                                                               
management,   and  assessment,   they  don't   have  a   fishery.                                                               
Obviously, they want fisheries.                                                                                                 
MR.  DOHERTY explained  that the  excess money  above and  beyond                                                               
what  is given  to the  department goes  into the  three separate                                                               
reserve funds and those funds  can't be intermingled. Whatever is                                                               
done for each of the three  fisheries is paid for by that fishery                                                               
with the department is paid off the top.                                                                                        
Sea cucumber enhancement has been  ongoing for the last 20 years,                                                               
but that  might not be  possible for  wild stocks because  of sea                                                               
otter predation. The Alutiiq Pride  Shellfish Hatchery (APSH) has                                                               
spent over  $300,000 to  get that industry  off the  ground; they                                                               
have an association  and the excess money goes  into running that                                                               
MR. DOHERTY said the sea  urchin and geoduck clam fisheries don't                                                               
have a  lot of money to  put in the bank  at the end of  the day.                                                               
Fortunately,  the sea  cucumber  fishery has  been  able to  bank                                                               
enough  money that  the fishermen  feel  they can  lower their  5                                                               
percent tax down to either 3  percent or 1 percent and still meet                                                               
their financial requirements  for the State of  Alaska. That will                                                               
enable  these  fishermen,  by reducing  their  tax,  to  actually                                                               
realize real money into their pockets at the end of the season.                                                                 
Unfortunately, the  initial legislation  that was formed  over 20                                                               
years  ago says  that a  majority of  all the  permit holders  is                                                               
needed to  change the tax, and  now a number of  those are latent                                                               
permits that are still bought on  an annual basis, but they don't                                                               
get fished. But  if you have a permit card,  even though you have                                                               
not made  a landing,  you are  part of  the association  and your                                                               
vote counts.                                                                                                                    
MR. DOHERTY  said three years  ago they  tried to change  the sea                                                               
cucumber tax from  5 percent to 3 percent, but  couldn't meet the                                                               
hurdle of getting  a majority of the sea  cucumber permit holders                                                               
to vote. This  legislation is 100 percent agreed  upon within the                                                               
association; they are just trying to  lower the bar to be able to                                                               
have a  vote that will  help fishermen  who are still  fishing to                                                               
lower the assessment. He added  that if the financial commitments                                                               
to the  State of Alaska are  not met, they won't  fish, and every                                                               
permit holder understands that.                                                                                                 
CHAIR GIESSEL thanked him for that explanation.                                                                                 
4:30:59 PM                                                                                                                    
SENATOR WIELECHOWSKI asked how many  permit holders there are and                                                               
how many of them live in Alaska.                                                                                                
MR. DOHERTY replied  that individuals in all  the three fisheries                                                               
get a limited  entry permit. So, one permit doesn't  let you dive                                                               
in all  three fisheries. There are  a little over 300  permits in                                                               
the fisheries that  has dropped from about 350.  Some permits are                                                               
non-renewable so the  number of permits is dropping  on an annual                                                               
basis.  About  65  percent  of   the  permits  are  from  Alaskan                                                               
4:32:01 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked if there is  an annual fee to  hold a                                                               
MR. DOHERTY answered  yes: the geoduck permit is  about $225, the                                                               
sea cucumber fishery is $75, and  the same for the red sea urchin                                                               
fishery. He added that of the  310 permit holders there are about                                                               
210 active divers.  Unfortunately, when they need to  vote on the                                                               
annual  tax, they  couldn't get  enough fishermen  to return  the                                                               
ballots  to lower  the  tax.  It frustrated  many  of the  active                                                               
SENATOR WIELECHOWSKI said he would like  to see some ideas on how                                                               
to get the  35 percent who don't live in  Alaska transferred into                                                               
Alaskans' hands.                                                                                                                
4:33:38 PM                                                                                                                    
CHAIR  GIESSEL,  finding  no  further  questions,  closed  public                                                               
SENATOR  COGHILL  moved  to  report   HB  354,  version  D,  from                                                               
committee  with  individual  recommendations  and  attached  zero                                                               
fiscal note. There were no objections and it was so ordered.                                                                    

Document Name Date/Time Subjects
Senate Resources - Hearing Agenda - 4 - 16 - 18.pdf SRES 4/16/2018 3:30:00 PM
HB197 ver L.PDF SRES 4/16/2018 3:30:00 PM
HB 197
HB197 Sponsor Statement.pdf SRES 4/16/2018 3:30:00 PM
HB 197
HB197 Summary of Changes ver A to ver L.pdf SRES 4/16/2018 3:30:00 PM
HB 197
HB197 Sectional Analysis.pdf SRES 4/16/2018 3:30:00 PM
HB 197
HB197 Fiscal Note-DNR-PMC-02-16-18.pdf SRES 4/16/2018 3:30:00 PM
HB 197
HB197 Supporting Document - Letter 4.2.2018.pdf SRES 4/16/2018 3:30:00 PM
HB 197
HB197 Supporting Document – Letter 4.9.2018.pdf SRES 4/16/2018 3:30:00 PM
HB 197
HB197 Supporting Document - Letter 4.28.2017.pdf SRES 4/16/2018 3:30:00 PM
HB 197
HB197 Supporting Document - Article Seed Bill 12.16.2014.pdf SRES 4/16/2018 3:30:00 PM
HB 197
HJR 29 CS (FIN).PDF SRES 4/16/2018 3:30:00 PM
HJR 29
HJR 29 Explanation of Changes.pdf SRES 4/16/2018 3:30:00 PM
HJR 29
HJR 29 Sponsor Statement.pdf SRES 4/16/2018 3:30:00 PM
HJR 29
HJR 29 Fiscal Note Leg Affairs.PDF SRES 4/16/2018 3:30:00 PM
HJR 29
HJR 29 Support Sitka Schools.pdf SRES 4/16/2018 3:30:00 PM
HJR 29
HJR 29 Supporting emails.pdf SRES 4/16/2018 3:30:00 PM
HJR 29
HJR 29 Supporting Documents SRS FFY 16 and FFY 17 Grants.pdf SRES 4/16/2018 3:30:00 PM
HJR 29
HB 354 ver D.PDF SRES 4/16/2018 3:30:00 PM
HB 354
HB 354 Sponsor Statement.pdf SRES 4/16/2018 3:30:00 PM
HB 354
HB 354 Fiscal Note HB354-3-3-18.PDF SRES 4/16/2018 3:30:00 PM
HB 354
HB 354 Fiscal Note HB354-3-29-18.pdf SRES 4/16/2018 3:30:00 PM
HB 354
HB 354 Supporting Document - SEAFA Letter.pdf SRES 4/16/2018 3:30:00 PM
HB 354
HB 354 Supporting Document - SARDFA Letter.pdf SRES 4/16/2018 3:30:00 PM
HB 354
HB 354 Supporting Document - Carruth Letter.pdf SRES 4/16/2018 3:30:00 PM
HB 354
HB 354 Supporting Document - Leighton Letter.pdf SRES 4/16/2018 3:30:00 PM
HB 354
HCR23 - Version D.PDF SRES 4/16/2018 3:30:00 PM
HCR 23
HCR23- Fiscal Note.PDF SRES 4/16/2018 3:30:00 PM
HCR 23
HCR23 - Comments - AK Farm Bureau to SRES.pdf SRES 4/16/2018 3:30:00 PM
HCR 23