Legislature(1993 - 1994)
02/11/1994 08:30 AM House FSH
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON FISHERIES
February 11, 1994
8:30 a.m.
MEMBERS PRESENT
Representative Carl E. Moses, Chairman
Representative Harley Olberg, Vice Chairman
Representative Irene Nicholia
Representative Cliff Davidson
Representative Gail Phillips
COMMITTEE CALENDAR
Overview: Alaska Seafood Marketing Institute
WITNESS REGISTER
KIM ELTON, Executive Director
Alaska Seafood Marketing Institute
1111 West 8th Street, Room 100
Juneau, Alaska 99801-1895
Phone: 465-5560
POSITION STATEMENT: Gave a presentation of the Alaska
Seafood Marketing Institute
TAPE 94-7, SIDE A
Number 022
MR. KIM ELTON, EXECUTIVE DIRECTOR, ALASKA SEAFOOD MARKETING
INSTITUTE, referred to a chart which was included in
committee members' packets, and noted that last fiscal year
the total budget for the Alaska Seafood Marketing Institute
(ASMI) was a little over $14 million. Slightly over
two-thirds of that budget was dedicated to overseas
marketing through a combination of federal funds and state
cash match. The industry contribution was about 22 percent
of the total budget, with state dollars for domestic
marketing totaling about nine percent. This year the chart
is dramatically different. Industry funds are in the area
of 47 percent of the total budget of almost $16 million.
State funds are mostly cash match dollars for the federal
grant monies, totaling about $1.1 million to secure the
$7.25 million from the federal Market Promotional Program
(MPP). The amount of state dollars remaining in the
domestic marketing program is .3 percent, or about $48,000.
Number 226
MR. ELTON stated there are three elements to the
bureaucratic changes. The first is a management report
designed in 1992. The second element is the passage of the
one percent salmon harvesters assessment that added seven
new fishermen to the board and added about $3.8 million to
our domestic salmon marketing effort. The third element was
a facilitated retreat that the board of directors went
through earlier this year.
MR. ELTON addressed the management report. It is called the
Prior/Martech Report on ASMI and it recommended several
things. The first was a dramatic restructuring of the
committee system that has driven a lot of the ASMI decisions
on promotions, especially in the domestic market. ASMI has
a total of nine standing committees that consist entirely of
industry members, either from the processing or marketing
end to the fish harvester end. The third recommendation
concerned ASMI's advertising agency and their fees.
Prior/Martech found that ASMI's agency fees were higher than
the norm and recommended that ASMI retool their promotions
to focus more on trade promotions rather than on consumer
promotions. They advocated that ASMI does not have a high
enough level of funding to be effective in consumer
marketing. Another element they noted was the absurdity of
the state's procurement system.
MR. ELTON continued by stating that Prior/Martech made other
recommendations that he disagreed with and he thought the
board would disagree with also. One was to take 30 percent
of ASMI's promotional funds and link with other generic
seafood promoters. This is a substantial amount of money.
Prior/Martech also suggested the ASMI staff be centralized
in Anchorage. ASMI has a staff almost evenly split between
Seattle and Juneau. The Seattle staff is the marketing
component and they bring ASMI closest to those markets they
are most interested in. Bringing the Seattle staff to
Alaska would greatly increase ASMI's cost of doing business.
Prior/Martech stated ASMI was operating at 65 percent
efficiency, but that it could be largely attributed to some
of the impediments presented by operating in the state
government. ASMI is attempting to perform a private sector
job, which is marketing, within the structure of a
government bureaucracy.
MR. ELTON spoke to the second of the bureaucratic changes;
that being the salmon harvester's assessment passed by the
legislature last year. It essentially replaced the $1.3
million general fund monies with between $3-$4 million from
the salmon harvester segment of the industry. Part of that
legislative package included the addition of seven new
fishermen to the board. The board is now a 25-member board
comprised of 12 fishermen, 12 processors and one public
member. The immediate result has been very beneficial.
There has been a dramatic increase in dialogue with fish
harvesters. The legislation also mandated the creation of a
salmon marketing committee. This is comprised of four
fishermen and three processors who will make recommendations
to the full board on how the fish harvester dollars are
spent in the domestic market. ASMI recently signed a
contract with the University of Alaska and Seafare for a
Salmon Information Service, as a part of the legislation.
Number 250
MR. ELTON addressed the final bureaucratic element, which
was the facilitated retreat held in January. The board
hired a firm through the solicitation process. The firm was
Co-Development Associates. They have facilitated for BP
Alaska, Toyota, and the ANC in South Africa. As a result of
the Prior/Martech Management Study and of new board members,
the retreat was designed to pull everyone together and get
them going in the same direction. The board created a
working executive committee comprised of two fishermen, two
processors, the public member of the board, and the chair of
the board. They focused on four core issues, and will make
their recommendations to the full board at the end of March.
The first recommendation was to define who the customer is;
the second, define who the competition is; the third, define
what quality level is attainable; and, the fourth, how to
foster more industry cooperation.
Number 270
MR. ELTON addressed some of the problems ASMI is facing.
The state procurement contributes to inefficiency at ASMI.
ASMI is unbundling a lot of the tasks the advertising agency
used to do and because of that, ASMI is running into more
and more into conflicts. The bidding requirement from three
sources is a problem, and going out for competitive bid is a
waste of time and money for ASMI. Getting sole source
authority in four days is impossible and there are times
when ASMI must move quickly to respond to an emergency
situation. Without state funding, ASMI would like more
latitude.
Number 377
REPRESENTATIVE PHILLIPS asked if ASMI has investigated the
possibility of privatizing ASMI's division of sales to
remove the restrictive requirements.
Number 383
MR. ELTON stated that ASMI has considered this. Up until
three years ago, the ASMI sales staff had been operating
apart from the state umbrella. Three years ago, they were
brought under the state umbrella, because it was an awkward
position for the state to be in with the ASMI sales person
being an employee of the advertising agency. There was a
perception of a conflict of interest.
Number 396
REPRESENTATIVE PHILLIPS suggested there would be validity in
placing the sales staff under a separate contract.
Number 398
MR. ELTON stated it is an obvious solution. The easiest way
to move would be for ASMI to draft its own procurement code,
have it approved by the state and handle it within ASMI.
Number 409
MR. ELTON stated another problem facing ASMI is the
shrinking portion of the budget supplied by the federal
government. ASMI's percent of these funds has increased,
but the total amount of funds available have shrunk and it
looks as though they will continue to shrink.
MR. ELTON addressed another problem with the salmon
harvester's assessment. After reviewing all the
information, the Department of Revenue should have collected
$3.8 million; however, they only collected $2.8 million.
ASMI has been working with the Department of Revenue in an
attempt to reconcile the fish ticket information from the
Department of Fish & Game (ADF&G) with the Department of
Revenue.
Number 455
MR. ELTON addressed the final problem ASMI is facing; the
fiscal year carryover. There will be FY 94 dollars ASMI
will not be allowed to spend in FY 95, because of delays in
collections of the harvester's assessment and appropriations
from Revenue. This is also true for the processor's
assessment. ASMI is working with the Office of Management
and Budget (OMB) to solve this problem and is looking for
authority to carryover program receipts from one fiscal year
to another.
Number 491
REPRESENTATIVE PHILLIPS congratulated ASMI for the recipes
they have developed and stated it is a good public relations
tool.
MR. ELTON stated the recipes help in marketing seafood,
because consumers tend to shy away from the purchase of
seafood when they are not familiar with it.
Number 514
MR. ELTON stated he has felt a certain amount of frustration
because the simplest way to define the "owner state" is the
fisheries. He said it is a common property resource owned
by the state, managed by the state, enhanced by the state,
and it's a resource that has fed the economy of the state
for a long period of time. There are a lot of people who
are not protected from the booms and busts in the industry
and many of these people will have to make the decision to
stay or leave in the next few years. The frustration felt
is relative to the fact that the fishing industry has become
the "forgotten industry."
MR. ELTON commented, the state has done a very good job with
the business plan for the fishing industry relative to
investment, production, management, research, and marketing,
but the state cannot walk away now. The first portion of
the business plan is investment. The state has invested
hundreds of millions of dollars in the fishing industry
through hatcheries, port facilities, runways, and boat and
permit loans. The private sector has also invested in the
fishing industry. About five billion dollars has been
invested in onshore plants, permits, boats, and equipment.
The second element of the business plan is production.
Alaska produces over five billion pounds of seafood protein
a year. This is more than half of what the entire United
States produces. The next portion of the business plan is
management. The state's professional managers at the
Department of Fish & Game have managed a program that
provides direct jobs for 19,000 people and indirect and
induced jobs for another 16,000. That's a total of 35,000
people depending on the fishing industry, and management has
done a good job in encouraging that kind of economic growth.
The state has done very good, but we are slipping fast.
Management at Fish & Game is being hurt by inflation and the
investment in management is not going up as fast as
inflation is. The state needs to focus on management. The
forth element of the business plan is research. In looking
back, we can see dramatic events; the development of surimi
being one. Research is being hammered. Research through
ADF&G and other components including the University of
Alaska or through the Alaska Fisheries and Development
Foundation (AFDF) is severely limited. The fifth element of
the business plan is marketing. The harvesters, processors
and the federal government have made a financial commitment
to marketing, but the state has withdrawn from the joint
marketing effort.
Number 600
REPRESENTATIVE IRENE NICHOLIA asked Mr. Elton which section
of the University will be performing the Salmon Information
Service.
Number 604
MR. ELTON replied it would be conducted through the
Institute of Social and Economic Research (ISER) unit of the
University of Alaska, Anchorage and they will subcontract
with the Seafare Group, publishers of Seafood Leader, Simply
Seafood and other publications.
Number 615
REPRESENTATIVE DAVIDSON asked Mr. Elton if he would comment
on how he saw the Individual Fishing Quota Program as it
attempts to privatize the common property resources of the
"owner state." Representative Davidson spoke to the
decimation of the research portion of the state effort and
said, nothing is more illustrative than the example of
dismantling a perfectly fine research effort built up over
many years in Kodiak and we locate part of it away from
their federal counterparts in Anchorage.
Number 632
MR. ELTON stated he was hesitant to comment on quota systems
and would not presume to know what is best from a management
perspective. The increased discussion of quota systems is
indicative of the state of the industry. As the industry
declines, people start casting about for ways to stabilize
the industry and the economic return. There are market
implications.
TAPE 94-7, SIDE B
Number 000
MR. ELTON continued with a discussion of research and
addressed the Fisheries Industry and Technology Center
(FITC) enzyme research for arrowtooth flounder and its
importance. He also addressed marine mammal research and
its importance to fisheries management.
Number 070
MR. ELTON spoke to an item of debate both in the legislature
and the administration; that is whether the fishing industry
is paying its way. He referenced a report from OMB which
states that the fishing industry is not paying its way. Mr.
Elton noted that a portion of the Exxon Valdez litigation
fees were "charged off" to the fishing industry.
Number 107
REPRESENTATIVE DAVIDSON asked Mr. Elton if OMB was guilty of
using "sloppy" numbers, and whether it was true that
livelihoods would suffer when we are forced to manage a
resource conservatively, because of lack of good
information?
MR. ELTON said the short answer is no. He stated there is a
problem across the spectrum. It involves policy makers like
legislators, Fish & Game, like himself, and in the
Governor's office. It involves a lack of knowledge and a
lack of interest in the state's largest economic engine.
There are a lot of assumptions and many things taken for
granted.
Number 145
REPRESENTATIVE PHILLIPS expressed her concern over the
industry and wondered why we continue to spend millions of
dollars and keep losing ground. Representative Phillips
asked Mr. Elton if he would consider writing an assessment
when he's no longer in his position as Executive Director of
ASMI.
Number 160
MR. ELTON said he would be happy to write an analysis. He
stated he believes the state has to invest, but that it is
not the only answer. An economic return will follow, but,
perhaps not immediately. Private sector involvement is
necessary, too. Consumption demands have not met
production.
Number 216
REPRESENTATIVE NICHOLIA asked Mr. Elton if any of the 12
fishing members of the board were from the Yukon or
Kuskokwim River?
Number 218
MR. ELTON answered that Mr. Nels Alexie is from the AYK
region.
Number 227
REPRESENTATIVE MOSES asked when ASMI anticipated an answer
from OMB on their carry forward funding issue.
Number 230
MR. ELTON replied ASMI sent over a memo at the end of last
week and if they did not hear within the next several days,
he would call OMB. He stated that he did not think it would
be a problem.
Number 236
CHAIRMAN MOSES asked if it could be solved through
legislation if the answer was not forth coming.
Number 238
MR. ELTON stated he thought it could be done as a part of
the budget packet.
Number 242
REPRESENTATIVE DAVIDSON referenced the recommendations of
Governor Hickel's Salmon Task Force, and that the number one
recommendation was to increase the domestic marketing
effort, and asked Mr. Elton where that recommendation
currently stands.
Number 258
MR. ELTON replied that the Salmon Strategy Task Force
identified several areas and one was that $9-$10 million a
year needed to be spent in the domestic market place to make
the needle move at all. They recommended a $10 million
commitment. When the Governor's office prepared the budget,
all state monies were eliminated for domestic marketing.
Mr. Stastny with OMB, reasoned that the fishing industry is
a "mature" industry, and as such the components had to step
in and take the place of the state. ASMI argued that
economic investment decisions should not be based on
maturity. Also, it was a rule that was not applied to all
marketing programs (tourism). All monies were replaced by
industry monies. Mr. Elton stated that there was a
continuing role for the state as a joint partner in
marketing.
ADJOURNMENT
Chairman Moses adjourned the meeting at 9:47 a.m.
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