Legislature(2019 - 2020)GRUENBERG 120

04/04/2019 10:00 AM House FISHERIES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved HB 105 Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE SPECIAL COMMITTEE ON FISHERIES                                                                            
                         April 4, 2019                                                                                          
                           10:01 a.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Louise Stutes, Chair                                                                                             
Representative Bryce Edgmon                                                                                                     
Representative Chuck Kopp                                                                                                       
Representative Jonathan Kreiss-Tomkins                                                                                          
Representative Geran Tarr                                                                                                       
Representative Sarah Vance                                                                                                      
Representative Mark Neuman                                                                                                      
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 105                                                                                                              
"An Act relating to claims against protection and indemnity                                                                     
insurance policies of vessel owners."                                                                                           
     - MOVED HB 105 OUT OF COMMITTEE                                                                                            
HOUSE BILL NO. 65                                                                                                               
"An  Act  repealing  the fisheries  business  tax  allocation  to                                                               
municipalities;  repealing the  refunds to  local governments  of                                                               
fisheries  business  taxes;  repealing revenue  sharing  for  the                                                               
fishery resource landing tax; providing  for an effective date by                                                               
amending the  effective date of  sec. 36,  ch. 61, SLA  2014; and                                                               
providing for an effective date."                                                                                               
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 105                                                                                                                  
SHORT TITLE: COMM FISHERMEN'S FUND:VESSEL OWNER CLAIMS                                                                          
SPONSOR(s): REPRESENTATIVE(s) ORTIZ                                                                                             
03/25/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/25/19       (H)       FSH, FIN                                                                                               
04/02/19       (H)       FSH AT 10:00 AM GRUENBERG 120                                                                          
04/02/19       (H)       Heard & Held                                                                                           
04/02/19       (H)       MINUTE(FSH)                                                                                            
04/04/19       (H)       FSH AT 10:00 AM GRUENBERG 120                                                                          
BILL: HB  65                                                                                                                  
SHORT TITLE: FISH TAX: REPEAL MUNI REFUNDS/REV. SHARE                                                                           
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/20/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/20/19       (H)       FSH, CRA, FIN                                                                                          
04/04/19       (H)       FSH AT 10:00 AM GRUENBERG 120                                                                          
WITNESS REGISTER                                                                                                              
LIZ HARPOLD, Staff                                                                                                              
Representative Dan Ortiz                                                                                                        
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke on behalf of Representative Ortiz,                                                                 
sponsor of HB 105.                                                                                                              
BRUCE TANGEMAN, Commissioner Designee                                                                                           
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  On behalf of the governor, provided a brief                                                              
overview of HB 65.                                                                                                              
BRANDON SPANOS, Deputy Director                                                                                                 
Tax Division                                                                                                                    
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a sectional analysis of HB 65.                                                                  
ACTION NARRATIVE                                                                                                              
10:01:47 AM                                                                                                                   
CHAIR  LOUISE  STUTES  called  the  House  Special  Committee  on                                                             
Fisheries meeting to order at  10:01 a.m.  Representatives Vance,                                                               
Kreiss-Tomkins, Edgmon,  and Stutes were  present at the  call to                                                               
order.   Representatives Kopp,  Neuman, and  Tarr arrived  as the                                                               
meeting was in progress.                                                                                                        
        HB 105-COMM FISHERMEN'S FUND:VESSEL OWNER CLAIMS                                                                    
10:02:31 AM                                                                                                                   
CHAIR STUTES announced that the  first order of business would be                                                               
HOUSE  BILL  NO.   105,  "An  Act  relating   to  claims  against                                                               
protection and indemnity insurance policies of vessel owners."                                                                  
CHAIR STUTES stated  that no amendments were received  for HB 105                                                               
and that the committee's intent is to move the bill today.                                                                      
10:02:57 AM                                                                                                                   
LIZ  HARPOLD,  Staff,  Representative  Dan  Ortiz,  Alaska  State                                                               
Legislature, spoke on behalf of  Representative Ortiz, sponsor of                                                               
HB  105.   She thanked  the committee  for hearing  the bill  and                                                               
noted there is much industry support for the bill.                                                                              
10:04:04 AM                                                                                                                   
REPRESENTATIVE KOPP moved to report  HB 105 out of committee with                                                               
individual  recommendations and  the  accompanying fiscal  notes.                                                               
There  being no  objection, HB  105 was  reported from  the House                                                               
Special Committee on Fisheries.                                                                                                 
10:04:27 AM                                                                                                                   
The committee took an at-ease from 10:04 a.m. to 10:07 a.m.                                                                     
         HB 65-FISH TAX: REPEAL MUNI REFUNDS/REV. SHARE                                                                     
10:07:09 AM                                                                                                                   
CHAIR STUTES announced that the  final order of business would be                                                               
HOUSE BILL NO.  65, "An Act repealing the  fisheries business tax                                                               
allocation  to municipalities;  repealing  the  refunds to  local                                                               
governments  of  fisheries   business  taxes;  repealing  revenue                                                               
sharing for  the fishery resource  landing tax; providing  for an                                                               
effective date  by amending  the effective date  of sec.  36, ch.                                                               
61, SLA 2014; and providing for an effective date."                                                                             
10:07:42 AM                                                                                                                   
BRUCE  TANGEMAN,  Commissioner  Designee, Department  of  Revenue                                                               
(DOR), testified on behalf of  the governor.  He paraphrased from                                                               
the  governor's letter  of February  15, 2019,  [included in  the                                                               
committee packet], which read in part:                                                                                          
     Currently,  the   state  shares  revenues   from  state                                                                    
     fisheries business taxes with  municipalities.  For the                                                                    
     fisheries  business  taxes,  50  percent  of  Fisheries                                                                    
     Business  Taxes  are  shared  with  the  municipalities                                                                    
     where   the    fishery   resources    were   processed.                                                                    
     Similarly, the  state shares 50 percent  of the Fishery                                                                    
     Resource Landing  Tax with  the municipality  where the                                                                    
     fishery resources were landed.   The revenues that form                                                                    
     the  basis of  the disbursement  each October  are from                                                                    
     taxes  collected  for  the previous  calendar  year  of                                                                    
     processing  and landing  of  fisheries  resources.   In                                                                    
     fiscal year  2018, the  state shared  approximately $29                                                                    
     million  in  revenues.   This  bill  would  repeal  the                                                                    
     statutes that provide for this revenue sharing.                                                                            
10:09:15 AM                                                                                                                   
COMMISSIONER TANGEMAN said the policy  rationale behind HB 65 was                                                               
to  identify   statewide  revenues  currently  being   shared  or                                                               
diverted  to  help  balance  the  budget.   He  stated  that  the                                                               
Fisheries Business  Tax, or the  raw fish tax, is  collected from                                                               
processors and  people that export unprocessed  fishery resources                                                               
from Alaska  and the  Fishery Resource Landing  Tax is  levied on                                                               
fishery  resources  processed  outside  of and  first  landed  in                                                               
Alaska.   He  said these  taxes relate  to processing  activities                                                               
within  and  outside  of an  incorporated  city  or  organization                                                               
borough.   He explained HB  65 would  make repeal of  the revenue                                                               
sharing portions  of these  two taxes  retroactive to  January 1,                                                               
2019.   Consequently,  he  continued, these  taxes  would not  be                                                               
shared with  the municipalities in  October 2019 even  though the                                                               
taxable event occurred in calendar year 2018.                                                                                   
COMMISSIONER  TANGEMAN noted  the  Fisheries  Business Tax  dates                                                               
back to 1899, pre-territorial Alaska.   He said the tax was first                                                               
shared with municipalities at 10  percent of the total revenue in                                                               
1962; the share  was raised to 20 percent in  1979; and raised to                                                               
the  current 50  percent in  1981.   Sharing with  an unorganized                                                               
borough was authorized in 1990,  he stated.  The Fishery Resource                                                               
Landing Tax dates  back to 1994, he related,  and the legislature                                                               
restructured the  tax in  1996 to  mirror the  Fisheries Business                                                               
Tax  program.    Sharing  was   part  of  the  program  from  the                                                               
beginning, he  noted.  He  said the implementation cost  would be                                                               
about $50,000  to update the  tax revenue management  system, and                                                               
no additional staff would be required.                                                                                          
10:11:10 AM                                                                                                                   
REPRESENTATIVE   EDGMON  asked,   "Why  decimate   local  coastal                                                               
communities...?"  He pointed out,  for example, that this revenue                                                               
sharing  represents one-third  of Unalaska's  revenue, and  as an                                                               
industrial  center the  community must  provide important  water;                                                               
wastewater; life,  safety, and fire protection;  law enforcement,                                                               
and a host of other services.   He stated Unalaska would struggle                                                               
at best  to recover that  one-third of  revenue to its  tax base.                                                               
He further  pointed out  that Unalaska is  just one  community of                                                               
many that  would find itself  with a huge  hole in its  budget in                                                               
one fell swoop.  He said  there must be some rationale other than                                                               
needing the money at the state level.                                                                                           
COMMISSIONER  TANGEMAN  offered  his belief  that  during  public                                                               
testimony the committee will be  hearing from all the communities                                                               
that this would  affect.  He said the rationale  from the state's                                                               
perspective  is that  it  has  limited resources  now  and is  in                                                               
uncharted  territory  simply by  actions  over  the last  several                                                               
years  that have  never  been  seen before:    a  portion of  the                                                               
earnings reserve  is being used  to fund government  and portions                                                               
of the [permanent fund] dividend  are not being distributed.  The                                                               
administration's perspective,  he related, is that  all available                                                               
revenue to  the state needs to  be brought to the  table and then                                                               
the executive branch and the  legislature need to decide the best                                                               
and most efficient way to  redistribute the entire revenue stream                                                               
back to  Alaska.   He said it  is not  a matter of  all of  it is                                                               
coming from the communities never to be seen again.                                                                             
REPRESENTATIVE   EDGMON   opined  that   the   [administration's]                                                               
thinking  is  absolutely flawed  and  absolutely  counter to  the                                                               
governor's  mantra that  the  state  is open  for  business.   He                                                               
maintained  that  the multiplier  effect  of  the coastal  Alaska                                                               
economies  from   the  maritime  and   transportation  businesses                                                               
enhances the  entire gross domestic  product (GDP) of  the state.                                                               
He said  taking away  the ability of  these local  communities to                                                               
provide  a  whole host  of  services  cripples their  ability  to                                                               
contribute to keeping  Alaska open for business.   He pointed out                                                               
that  for the  last  20 years  Unalaska has  by  volume been  the                                                               
largest seafood community  in the state.  He  further opined that                                                               
the commissioner's  response doesn't  have any  authenticity with                                                               
the premise behind  the whole thing, knowing that  if these local                                                               
communities  are  crippled  in  their ability  to  provide  these                                                               
services,  who will  come in  and provide  the services  or where                                                               
will this money come from?   That question remains a black cloud,                                                               
he  continued, and  therefore he  will be  opposing this  measure                                                               
with everything he's got.                                                                                                       
10:15:11 AM                                                                                                                   
CHAIR  STUTES inquired  whether, prior  to making  this decision,                                                               
the administration  had discussions  with any of  the communities                                                               
that would be greatly affected by the proposal.                                                                                 
COMMISSIONER TANGEMAN replied that he  doesn't know the answer to                                                               
that question.   The fisheries  tax resides in the  Department of                                                               
Revenue, he said, but this was  a part of the budget process that                                                               
he was not a part of.                                                                                                           
CHAIR  STUTES  requested  that, when  the  commissioner  is  next                                                               
before the committee, a response  is provided as to whether there                                                               
was any  kind of  dialogue regarding the  effect.   She concurred                                                               
with  Representative Edgmon  that  this  proposal would  preclude                                                               
Alaska  being  open for  business.    Transferring those  dollars                                                               
would shift  the burden to  local municipalities,  she continued,                                                               
which would  prevent them from  providing the amenities  that are                                                               
required to maintain a viable,  strong, and healthy community for                                                               
their citizens.  She pointed out  that a person can live anywhere                                                               
in the United States and fish  in Alaska, and the objective is to                                                               
keep those people  in Alaska with their families  and argued that                                                               
HB 65 is absolutely opposite of that direction.                                                                                 
10:16:39 AM                                                                                                                   
REPRESENTATIVE  NEUMAN recalled  that  the landing  tax would  be                                                               
retroactive  to cover  the cost  of  this operating  budget.   He                                                               
asked when those funds are let to the communities.                                                                              
COMMISSIONER TANGEMAN  responded the  taxes are  distributed back                                                               
to the  communities in  October each year  and the  revenues that                                                               
are  distributed are  the actual  revenues  collected during  the                                                               
previous calendar year.  So,  he explained, in October [2019] the                                                               
amount  would  be  distributed   based  on  the  actual  revenues                                                               
collected in calendar year 2018.                                                                                                
REPRESENTATIVE NEUMAN  offered his  understanding that  the money                                                               
that was let this year was  collected from the prior year, so the                                                               
money collected this  year is still sitting in  the Department of                                                               
COMMISSIONER TANGEMAN  answered yes;  the revenues  are collected                                                               
throughout the year and then distributed the following year.                                                                    
10:18:14 AM                                                                                                                   
CHAIR STUTES offered her  understanding that the administration's                                                               
proposal under  HB 65 is to  collect the 2019 revenue  as well as                                                               
going back to the 2018 revenue from these municipalities.                                                                       
COMMISSIONER TANGEMAN  replied it would  be more accurate  to say                                                               
not "distribute"  the revenues that  the municipalities  would be                                                               
expecting to  receive in 2019.   The bill wouldn't  take revenues                                                               
that were  already distributed, he  explained, it would  just not                                                               
distribute revenues that would be expected in October 2019.                                                                     
CHAIR STUTES rephrased her understanding  that it would be to not                                                               
distribute  revenues   that  the  municipalities   are  currently                                                               
banking on.                                                                                                                     
COMMISSIONER TANGEMAN responded yes.                                                                                          
10:18:58 AM                                                                                                                   
REPRESENTATIVE  KREISS-TOMKINS posed  a hypothetical  scenario in                                                               
which HB  65 doesn't  pass the  legislature and  there is  a line                                                               
item in the budget, pursuant to  the law, that these revenues get                                                               
disbursed  back   to  municipalities.    He   asked  whether  the                                                               
commissioner is willing to make  any comment to municipalities on                                                               
the degree  to which the  governor or administration  would abide                                                               
by  the will  of  the legislature  if  HB 65  fails  to pass  and                                                               
disburse those revenues back to  communities and to not line item                                                               
veto that disbursement.                                                                                                         
COMMISSIONER  TANGEMAN  answered that  he  cannot  speak to  what                                                               
actions  the governor  may or  may not  take regarding  line item                                                               
REPRESENTATIVE  KREISS-TOMKINS  inquired   how  the  commissioner                                                               
would suggest municipalities plan around that uncertainty.                                                                      
COMMISSIONER  TANGEMAN  replied that  he  couldn't  speak to  how                                                               
communities would need to prepare for this action.                                                                              
REPRESENTATIVE KREISS-TOMKINS commented  that that is unfortunate                                                               
because there is a  lot of revenue that is a  major share of many                                                               
municipalities' budgets.   He said  "black cloud"  is appropriate                                                               
because there is  not the wherewithal to respond to  that kind of                                                               
uncertainty.  He asked why  the administration is not proposing a                                                               
revenue increase on the fish  tax or a different revenue measure,                                                               
rather than preventing  the disbursement of revenues  back to the                                                               
COMMISSIONER  TANGEMAN  answered that  HB  65  is the  governor's                                                               
attempt  in this  budget  process  to address  a  portion of  the                                                               
revenue  section.   He  said  the  administration is  willing  to                                                               
listen  to bills  that are  introduced and  recognizes that  this                                                               
will be an ongoing discussion this year and next year.                                                                          
10:21:53 AM                                                                                                                   
REPRESENTATIVE TARR  stated that  HB 65 doesn't  impact Anchorage                                                               
residents in  the same way  it does coastal communities,  but she                                                               
sees her role  as having a statewide perspective.   She expressed                                                               
her disappointment  with the  lack of  follow-through on  some of                                                               
these proposals.  She said she  would be willing to work on doing                                                               
things differently if  there was leadership from  the third floor                                                               
on workable  proposals.   But for  this proposal,  she continued,                                                               
there has  been no  communication with  communities and  no plan,                                                               
and it would absolutely devastate  small communities.  She opined                                                               
that  it is  a failure  of leadership  on the  part of  the third                                                               
floor to put  forth proposals like this without any  backup as to                                                               
what the  impacts would  be and to  create divisiveness  by doing                                                               
things that  disproportionately impact  some parts of  the state.                                                               
She  offered her  hope that  the message  of needing  to do  this                                                               
differently will be  heard by the third floor.   She said changes                                                               
must  to  be  done  in  a way  that  doesn't  devastate  a  local                                                               
community and that engages people in  how it will be done and how                                                               
it will work.                                                                                                                   
10:23:45 AM                                                                                                                   
REPRESENTATIVE VANCE allowed  that this is a  hard and unpleasant                                                               
conversation, but  recalled the  governor saying  that everything                                                               
is  on the  table.    Just because  everything  is  on the  table                                                               
doesn't mean it  is going to pass, she continued;  there needs to                                                               
be discussion  for and against  the proposal's merits.   She said                                                               
she agrees with  her colleagues that HB 65 goes  against the idea                                                               
of localized government,  of Alaska being open  for business, and                                                               
of sharing in the responsibilities of state government.                                                                         
REPRESENTATIVE VANCE  opined that if  this fish tax had  been 100                                                               
percent  to the  municipalities  then she  would  say that  isn't                                                               
equitable.  But, she continued,  being at 50 percent it's sharing                                                               
the load  because now her  district isn't affected to  the degree                                                               
as some of  the other coastal communities.  She  pointed out that                                                               
Homer  invests the  funds directly  back into  the public  access                                                               
fish dock to support the  fishing industry infrastructure.  Homer                                                               
is putting  that money directly  back to that purpose,  she said,                                                               
and she thinks that is what  most of these communities are doing.                                                               
She further pointed  out that the state relies upon  the dock and                                                               
fishery infrastructure  to maintain  that resource.   To  have it                                                               
swept and then  distributed across the state,  she added, creates                                                               
an  undue  burden  on  these communities  that  are  expected  to                                                               
maintain this infrastructure.                                                                                                   
REPRESENTATIVE VANCE  said the  responsibility of  legislators is                                                               
to look at  the state as a  whole.  She noted  that Alaska's fish                                                               
belong  to  everyone  but  said   she  can't  ignore  that  these                                                               
communities are expected to provide  that infrastructure and need                                                               
the support  to do so.   She observed that  HB 65 talks  about an                                                               
established harbor  facility grant  and grant applications.   She                                                               
further  observed that  Section 4  deletes the  previous language                                                               
and inserts, "The tax collected  under this chapter shall be paid                                                               
into a separate account in the  general fund."  She requested the                                                               
commissioner  to speak  to  the  bill itself  to  provide a  full                                                               
understanding of what is being  proposed versus what is currently                                                               
on the books.                                                                                                                   
CHAIR STUTES noted that Mr.  Brandon Spanos would review the bill                                                               
once committee members are finished asking questions.                                                                           
10:27:07 AM                                                                                                                   
REPRESENTATIVE KOPP remarked that  HB 65 seems broadly consistent                                                               
with  the budget  being worked  as a  math problem  behind closed                                                               
doors versus  working with affected  constituencies.  He  said he                                                               
understands how this can happen,  especially if key personalities                                                               
aren't  really  tied  in  with  the  state.    He  suggested  the                                                               
administration send someone  to Naknek in the summer  to see what                                                               
happens to  a little town that  goes from 1,100 to  about 15,000.                                                               
He shared his experience of  having worked in Naknek year around.                                                               
He related  that the  police, fire,  and emergency  medical calls                                                               
explode, the  landfill load becomes  massive from  the canneries,                                                               
and sewer and  water loads become massive.  He  said these little                                                               
communities need help.   He pointed out that  currently Naknek is                                                               
desperately looking  for a  couple million  dollars to  build out                                                               
its sewage infrastructure  so it can handle this  fishery that is                                                               
one of  the top  four largest  landings in  the U.S.  for tonnage                                                               
going across the dock.                                                                                                          
REPRESENTATIVE  KOPP further  shared his  experience of  managing                                                               
the personal  use dipnet fishery in  the City of Kenai  for about                                                               
seven years.   There were no  resources, he related, and  half of                                                               
Anchorage and  the Matanuska-Susitna  Valley were  fishing there.                                                               
He said it  was like getting run  over by a truck  from the sheer                                                               
force of managing that much parking  and that much fish waste and                                                               
human waste all along the  beaches.  These little communities, he                                                               
continued, feel  the same way  - when  the fishery is  over, they                                                               
take a  deep sigh and recover,  but it is a  tremendous strain on                                                               
resources and  that is  why there  is this  emotion.   He advised                                                               
that being  out in these  places during  the peak will  show they                                                               
aren't sleepy little  areas - they are tied into  the whole world                                                               
as a  point of origination  for landing  and catch and  they need                                                               
help to do that better.                                                                                                         
10:30:29 AM                                                                                                                   
REPRESENTATIVE EDGMON related  that the Bristol Bay  Borough is a                                                               
small industrial center and with  about 100,000 people coming and                                                               
going in the  summer a lot of services are  expanded.  He pointed                                                               
out that the  Bristol Bay Borough is looking at  over $10 million                                                               
just to fix a sewer  infrastructure issue that has been lingering                                                               
for some time  and is critical to the overall  performance of the                                                               
local industry.  He agreed  with Representative Kopp's suggestion                                                               
to  visit communities  during the  [summer] season.   He  offered                                                               
credit to  the administration  for trying  to balance  the budget                                                               
and to bring  significant cost drivers under control.   He stated                                                               
everyone needs to  be cognizant of the  long-term projections and                                                               
factor them into  long-range thinking but opined  that the short-                                                               
term impacts  of HB 65 don't  pass muster.  He  asked whether the                                                               
Dunleavy Administration would be open to new revenues.                                                                          
COMMISSIONER  TANGEMAN  replied  that Governor  Dunleavy  is  not                                                               
promoting revenues right now and  believes the spending side must                                                               
be addressed first.   He offered his own  belief that introducing                                                               
revenue bills  waters down  the spending  discussion and  said he                                                               
believes the governor  would agree on this.  He  said he believes                                                               
the spending  side needs  to be  looked at  first.   He concurred                                                               
with  Representative Kopp  that the  administration did  approach                                                               
this budget  process differently.  Commissioner  Tangeman related                                                               
that  the governor  came to  him first  and said  it needs  to be                                                               
known how  much revenue  there is.   That is  why these  types of                                                               
bills are  put on the  table, he  said; it is  available revenue,                                                               
not  getting into  the  impact  side of  it,  which is  obviously                                                               
extreme.  The governor wanted  to know what the available revenue                                                               
was first, he continued, and then  go to the expenditure side and                                                               
start prioritizing, almost a zero-based  budge approach.  That is                                                               
why there is  the budget that was presented and  the deficit that                                                               
was  presented, he  added.   He said  the administration  doesn't                                                               
have revenue bills  this year, but the  administration knows that                                                               
revenue bills will  be discussed as part of the  process and will                                                               
be prepared to sit at these  microphones to discuss those when it                                                               
is appropriate.                                                                                                                 
REPRESENTATIVE  EDGMON recalled  the  governor's announcement  of                                                               
plans to continue his community visits  on the budget.  On behalf                                                               
of the  communities in House  District 37,  Representative Edgmon                                                               
invited the  governor, Commissioner Tangeman, and  others to come                                                               
to the communities,  meet with local leaders, and see  what it is                                                               
like in  the winter  as well  as the  summer.   He said  having a                                                               
local conversation  on the budget  and the fiscal future  is very                                                               
much  warranted  and is  something  he  does regularly  with  his                                                               
10:34:43 AM                                                                                                                   
CHAIR STUTES  asked whether  Commissioner Tangeman  believes that                                                               
revenue is a part of the resolution of Alaska's fiscal problem.                                                                 
COMMISSIONER TANGEMAN responded  it is obviously one  side of the                                                               
story  - it  is available  revenue and  prioritizing expenditures                                                               
for that  revenue.   He said the  state is in  a position  it has                                                               
never  been in  before,  since building  the  state's budget  has                                                               
generally started  with the previous year's  budget and adjusting                                                               
it as needed.   For revenues, he continued, Alaska  has lived and                                                               
died  by the  price  of  oil, with  boom  years  and bust  years.                                                               
Living  in a  state that  has stable  revenues makes  budgeting a                                                               
completely different  exercise, he noted.   He added  that Alaska                                                               
is incredibly fortunate  to have not had any  personal, sales, or                                                               
other taxes and  is the envy of 49 other  states because of that.                                                               
He predicted there  would be a new Alaska in  the coming decades.                                                               
He  explained  that   his  perspective  is  to   budget  the  way                                                               
individuals do their monthly budgets    how much revenue there is                                                               
to  spend, rather  than  to  spend first  and  then  look at  the                                                               
revenue.   He offered  his belief  that revenues  are not  at the                                                               
level needed  for a sustainable period  and that it is  a problem                                                               
everyone  must tackle.    He said  he  therefore appreciates  the                                                               
approach that this governor is taking.                                                                                          
CHAIR STUTES  said she equates it  to the State of  Alaska trying                                                               
to build a  new puzzle and all the pieces  are needed to complete                                                               
that puzzle and one of those pieces is revenue.                                                                                 
10:37:21 AM                                                                                                                   
REPRESENTATIVE TARR  expressed her surprise at  the comment about                                                               
not having a conversation about  revenue.  This bill, she opined,                                                               
is recognition that the state  needs more revenue, but instead of                                                               
being  a new  form  the  bill just  takes  the  money from  local                                                               
communities.   It doesn't seem  entirely honest to say  that this                                                               
isn't a  conversation about revenue  when really it is,  but it's                                                               
just in  a more subverted form,  she further opined.   It's not a                                                               
new tax,  she continued, it's  a shifting of  the responsibility,                                                               
so the  conversation is happening but  just not in a  way that is                                                               
moving forward.                                                                                                                 
REPRESENTATIVE  KREISS-TOMKINS   commented  that  this   is  very                                                               
disagreeable  in a  policy  sense but  in  an odd  way  it is  an                                                               
intellectually honest budget.   He said this is  what a cuts-only                                                               
approach to  balancing the  budget looks like,  and in  a certain                                                               
sense it  moves the  conversation forward  and brings  into focus                                                               
the stakes, even though the stakes might not be liked.                                                                          
CHAIR STUTES thanked Commissioner  Tangeman for coming before the                                                               
committee.  She recognized that it  is not a pleasant subject and                                                               
offered appreciation for  the commissioner's straightforwardness.                                                               
She invited Mr. Spanos to provide a sectional analysis of HB 65.                                                                
10:39:51 AM                                                                                                                   
BRANDON  SPANOS, Deputy  Director,  Tax  Division, Department  of                                                               
Revenue  (DOR),   provided  a   sectional  analysis  of   HB  65.                                                               
Regarding  Section  1  and  Section 2  he  paraphrased  from  the                                                               
analysis included in the committee packet, which read:                                                                          
     Section 1 would amend  AS 29.60.800(a), relating to the                                                                    
     harbor facility  grant fund, to  conform to  the repeal                                                                    
     later in the bill of  the statute providing for refunds                                                                    
     to municipalities from the fisheries business taxes.                                                                       
     Section 2  would amend AS 29.60.810,  relating to grant                                                                    
     applications for  harbor facilities, to conform  to the                                                                    
     repeals  later in  the bill  of the  statutes providing                                                                    
     for the  allocations and the refunds  to municipalities                                                                    
     of fisheries business taxes.                                                                                               
10:41:05 AM                                                                                                                   
REPRESENTATIVE  NEUMAN  requested  Mr.  Spanos  to  describe  the                                                               
sections in  addition to reading  them from the analysis  so that                                                               
the public could better understand them.                                                                                        
MR. SPANOS  responded he would do  his best but noted  that HB 65                                                               
is  a fairly  technical bill  with repealers  and technicalities.                                                               
He explained  HB 65 would stop  the sharing of 50  percent of the                                                               
tax with local communities and would  allow that money to stay in                                                               
the general fund to be appropriated as the legislature sees fit.                                                                
COMMISSIONER  TANGEMAN recalled  a  previous  question about  the                                                               
harbor facility  grant fund  and what  that fund  has to  do with                                                               
this.   He  requested Mr.  Spanos to  explain how  that interacts                                                               
with HB 65 and why it is in the statute in the first place.                                                                     
MR. SPANOS  explained the Department of  Commerce, Community, and                                                               
Economic  Development (DCCED)  administers the  harbor facilities                                                               
grant fund.   He  said DOR's  function is  simply to  collect the                                                               
revenue from  the payers  of the Fisheries  Business Tax  and the                                                               
Fishery Resource  Landing Tax  and then  transfer the  revenue to                                                               
DCCED and  the local municipalities.   He stated he is  unable to                                                               
speak to how the fund itself functions.                                                                                         
CHAIR  STUTES  requested  Commissioner Tangeman  to  provide  the                                                               
committee with a response regarding how that would be affected.                                                                 
COMMISSIONER TANGEMAN replied that DOR  would work with DCCED and                                                               
get back with a response.                                                                                                       
10:43:30 AM                                                                                                                   
REPRESENTATIVE VANCE brought attention to  [page 2, lines 1-4, of                                                               
HB  65,  which  state:    "A  municipality  or  regional  housing                                                               
authority  that  owns  a  harbor   facility  may  submit  to  the                                                               
department   of   Transportation   and   Public   Facilities   an                                                               
application  for  a   harbor  facility  grant  to   be  used  for                                                               
construction, expansion, major repair,  or major maintenance of a                                                               
harbor  facility."]    She  asked whether  that  is  a  different                                                               
conversation than with DCCED.                                                                                                   
COMMISSIONER  TANGEMAN responded  that DOR  administers the  tax,                                                               
collects it, and then distributes  the 50 percent back out, which                                                               
is the gist of  the bill.  He said DOR would  look at the details                                                               
of  the interplay  between the  Department of  Transportation and                                                               
Public Facilities  (DOT&PF), DCCED, and  DOR and include  that in                                                               
DOR's responses to the committee.                                                                                               
CHAIR  STUTES requested  that the  response address  what effects                                                               
[the bill] would have on the grants.                                                                                            
REPRESENTATIVE VANCE  stated that that  is the main  issue behind                                                               
her question.   She said the municipalities need  support for the                                                               
fisheries  infrastructure and  services.   She noted  that [under                                                               
Section 4 of  the bill] the [tax] money would  go into a separate                                                               
account in  the general  fund.   While the  bill says  a separate                                                               
account, she continued,  it would nonetheless go  into the bigger                                                               
Alaskan pot  to be  redistributed to the  communities.   She said                                                               
these coastal communities would have  a large deal of uncertainty                                                               
as to  whether that money would  be channeled back to  them in an                                                               
equitable  manner,  yet  they  bear  the  larger  burden  of  the                                                               
infrastructure that  supports the fisheries and  all the commerce                                                               
that  is   generated  through  them.     She  related   that  the                                                               
communities  want  to  know  where  the  assurance  is  from  the                                                               
administration that they will still  get that money back from the                                                               
state  for the  infrastructure  and services  if  the 50  percent                                                               
mechanism is taken away.  If  the coastal communities dry up, she                                                               
opined,  so  does  the  commerce  and that  is  the  opposite  of                                                               
strengthening the state's economy.                                                                                              
COMMISSIONER TANGEMAN replied that  walking through the sectional                                                               
analysis is  not going  to address that  question.   He requested                                                               
that Mr.  Spanos be  able to  provide the  rest of  the sectional                                                               
analysis and offered his appreciation for the question.                                                                         
10:46:58 AM                                                                                                                   
MR. SPANOS  resumed the  sectional analysis.   He  explained that                                                               
Section  4  would amend  a  title  within  the tax  statute  that                                                               
relates to  separate accounting of  the Fishery  Resource Landing                                                               
Tax, which is needed to conform to the overall repeal.                                                                          
MR. SPANOS related  that Section 5 would  repeal five [statutes],                                                               
one  within  DCCED's  statutes  and   the  rest  within  the  Tax                                                               
Division's statutes or the statutes  that DOR administers.  These                                                               
repeals,  he  continued,  basically  stop the  sharing  with  the                                                               
municipalities and with any other special funds.                                                                                
MR. SPANOS said  Sections 6   9 are  simply conforming amendments                                                               
for delayed provisions that are in existing law.                                                                                
MR. SPANOS  noted Section 10  clarifies the applicability  of the                                                               
first five sections of the bill, so it is transition language.                                                                  
MR. SPANOS  stated Sections 11    12 provide DOR with  timing for                                                               
repeal  of  various  regulations  that  are  currently  in  place                                                               
relating to the sharing of the taxes.                                                                                           
MR. SPANOS said Section 13  provides for retroactive application.                                                               
He  explained  that collection  of  the  2018 taxes  has  already                                                               
happened and those monies are now  sitting in the general fund to                                                               
be shared  in October, and  this section would have  those monies                                                               
remain in the general fund.                                                                                                     
MR. SPANOS related that Sections  14   18 provide effective dates                                                               
for various sections of the bill.                                                                                               
10:49:32 AM                                                                                                                   
REPRESENTATIVE KREISS-TOMKINS  spoke to  the point of  being open                                                               
for business.   He  noted he  represents coastal  communities and                                                               
that  he  has  basically  heard  "no" from  many  people  in  his                                                               
district,  which is  to be  expected  given the  bill would  take                                                               
revenue away  from those communities.   A broader point  here, he                                                               
said,  is   that  when  talking  about   revenues  from  resource                                                               
extraction  or  resource  industries  there is  an  interest  for                                                               
everybody  involved,  including  the  State of  Alaska,  to  have                                                               
alignment in those  revenues.  For example, he  continued, if the                                                               
North Slope Borough and the three  major oil and gas companies in                                                               
Alaska  were  consulted  about  the  oil  and  gas  property  tax                                                               
revenues  being taken  away from  the borough,  concern would  be                                                               
found that  it is  going to  have a  chilling effect  on resource                                                               
development up there.  There  would certainly be a similar effect                                                               
in  fisheries,   he  added.     He  further  related   that  when                                                               
reallocation of the  cruise ship passenger head  tax revenues was                                                               
looked  at,  it was  found  that  the  cruise industry  would  be                                                               
somewhat  jeopardized  because  communities would  be  unable  to                                                               
manage  the  effects.    There is  incentive  alignment  that  is                                                               
important  with  these  revenues  beyond  just  representing  his                                                               
communities in coastal Alaska that is at play here, he said.                                                                    
10:51:19 AM                                                                                                                   
CHAIR STUTES offered appreciation  for the commissioner's courage                                                               
in  coming before  the  committee with  such  an unpopular  bill.                                                               
Obviously, HB  65 is  a very  controversial bill,  she continued,                                                               
particularly  in  coastal communities.    She  said she  is  very                                                               
concerned  with how  this proposal  would affect  the communities                                                               
she represents as well as  coastal communities throughout Alaska.                                                               
She   stated  that   these   fishing   communities  provide   the                                                               
infrastructure and raw  services for the industry  and that these                                                               
communities depend on  their portion of the raw fish  tax to fund                                                               
their local  budgets.  She  said she has heard  no justifications                                                               
for  why the  state should  be entitled  to the  municipal share.                                                               
Aside from there being little  justification for such action, she                                                               
opined, there  is no benefit  to the  residents of the  state and                                                               
would  hurt residents.    She pointed  out  that while  residents                                                               
don't  pay any  state taxes,  they do  pay local  taxes, and  the                                                               
state would  be forcing local  governments to either  raise taxes                                                               
on  residents to  make  up the  shortfall  or drastically  reduce                                                               
essential services.   She said  the aforementioned is  simply her                                                               
opinion and she welcomes further  discussion and explanation from                                                               
the administration  on why this is  a good idea and  she will try                                                               
to  keep an  open mind.   She  noted there  would be  invited and                                                               
public testimony at the bill's next hearing.                                                                                    
[HB 65 was held over.]                                                                                                          
10:53:11 AM                                                                                                                   
There being no further business before the committee, the House                                                                 
Special Committee on Fisheries meeting was adjourned at 10:53                                                                   

Document Name Date/Time Subjects
HB105 Fiscal Note DLWD 03.29.19.pdf HFSH 4/2/2019 10:00:00 AM
HFSH 4/4/2019 10:00:00 AM
HB 105
HB105 Sponsor Statement 03.29.2019.pdf HFSH 4/2/2019 10:00:00 AM
HFSH 4/4/2019 10:00:00 AM
HB 105
HB105 Support Document - PSVOA 03.26.2019.pdf HFSH 4/2/2019 10:00:00 AM
HFSH 4/4/2019 10:00:00 AM
HB 105
HB105 Support Document - SEAFA 03.26.2019.pdf HFSH 4/2/2019 10:00:00 AM
HFSH 4/4/2019 10:00:00 AM
HB 105
HB105 Support Document - SEAS 03.26.2019.pdf HFSH 4/2/2019 10:00:00 AM
HFSH 4/4/2019 10:00:00 AM
HB 105
HB105 Support Document - UFA 03.26.2019.pdf HFSH 4/2/2019 10:00:00 AM
HFSH 4/4/2019 10:00:00 AM
HB 105
HB105 ver A 03.26.2019.PDF HFSH 4/2/2019 10:00:00 AM
HFSH 4/4/2019 10:00:00 AM
HB 105
HB065 ver A 02.20.19.PDF HFSH 4/4/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 65
HB065 Transmittal Letter 02.15.19.pdf HFSH 4/4/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 65
HB065 Sectional Analysis 04.02.19.pdf HFSH 4/4/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 65
HB065 Opposition Letter-UFA 04.01.19.pdf HFSH 4/4/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 65
HB065 Opposition Letter-SEAS 04.01.19.pdf HFSH 4/4/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 65
HB065 Opposition Letter-City of Unalaska 04.01.19.pdf HFSH 4/4/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 65
HB065 Opposition Letter-Bristol Bay Borough 03.31.19.pdf HFSH 4/4/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 65
HB065 Opposition Emails 04.02.19.pdf HFSH 4/4/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 65
HB065 Fiscal Note-REV 02.20.19.PDF HFSH 4/4/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 65
HB065 Fiscal Note-CED 02.20.19.PDF HFSH 4/4/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 65