Legislature(2001 - 2002)
02/07/2001 09:10 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
GENERAL SUBJECT(S): Status of Donald H. Carlson et al. vs. State of
Alaska Commercial Fisheries Entry Commission by Dept. of Law,
Commercial Fisheries Entry Commission, Office of Management and
Budget
The following overview was taken in log note format. Tapes and
handouts will be on file with the Senate Finance Committee through
the 22nd Legislative Session, contact 465-4935. After the 22nd
Legislative session they will be available through the Legislative
Library at 465-3808.
Time Meeting Convened: 9:10 a.m.
Tape(s): SFC-01 # 11
PRESENT:
x Senator Donley
x Senator Kelly
x Senator Austerman
x Senator Green
x Senator Hoffman
x Senator Leman
x Senator Olsen
x Senator Ward
x Senator Wilken
ALSO PRESENT:
STEPHEN WHITE, ASSISTANT ATTORNEY GENERAL, NATURAL RESOURCES
SECTION, DEPARTMENT OF LAW
LOG SPEAKER DISCUSSION
001 Co-Chair Donley Report on status of Donald H. Carlson vs.
State of Alaska Commercial Fisheries Entry
Commission (CFEC) by the Department of Law
014 STEPHEN WHITE, Happy to brief the Committee
Assistant Attorney He noted that there have been some
General, Natural developments that are important that have
Resources Division, fiscal implications for the state.
Department of law He indicated that he has already briefed
the chairman and would like to do the same
for the Committee
The Carlson case was filed in 1982, so it
is a 19 year-old lawsuit and has been to
the AK Supreme Court twice, attempted to
take to the U.S. Supreme Court once and it
has been back to trial court three times.
033 Issue is how much more the state can charge
non-residents for commercial fishing
licenses and limited entry permits
In 1982 five non-residents filed a class
action lawsuit against the state claiming
that the practice of charging them three
times more was unconstitutional under the
U.S. Constitution
Violated two clauses - commerce clause and
the privileges and immunities clause
He explained the privileges and immunity
clause - state cannot discriminate against
another state's citizens, especially, the
right to pursue a vocation
058 Referred to handout - requires the state to
charge non-residents three times more and
the fees shall be based on the economic
return for different fisheries
He noted that the CFEC has adopted
regulations that establish five levels of
fees related to the value of the various
fisheries - fee differential varies - it
goes from $100 to $500.
He added that there is also a statute that
establishes the fee for the crewmember
licenses - residents charges $60 and non-
residents $125.
Approximately 11,000 non-residents in this
class. He indicated that in 1989 the state
won at the trial court - the court said
that the fee structure was constitutional
091 Co-Chair Donley What trial judge was that?
092 Mr. White Answered Judge Hunt. He continued that the
Supreme Court reversed the decision in
favor of the state and sent it back to the
trial court. The case could be governed by
the commerce clause, but is certainly
governed by the privileges and immunity
clause.
However, a state could take into account
the state revenues that pay for the state
services. He pointed out that if the
resident's broad-based taxes pay for that
service and the non-residents don't than
the residents can be credited. One is for
fees and one is for taxes. Alaskans do
note pay broad-based taxes; however, they
do have oil revenues that pay for these
services- credit that to the residents
Supreme court said this in 1990
124 State continued litigating before the trial
court. In 1995 the state won again at the
trial court. Judge Michalski found that
the states fee structure was
constitutional.
Alaska supreme court said that there was
one thing wrong with the approach and he
pointed out the formula that the Alaska
Supreme Court described:
Formula - Maximum fee permissible for non-
resident = Fee for a resident permit +
(annual fisheries budget divided by the
Alaska population factored by the percent
state budget from oil revenue)
The dollar amount that the formula creates
is the amount that the state can charge a
non-resident, that year, more than it can
charge a resident.
155 Senator Hoffman Is that general funds?
Mr. White Total funds.
The U.S. Supreme court held that the
commerce clause does not apply, which
favored the state's approach
Back before the trial court and Judge
Michalski and litigating several things -
Arguing about whether the state has to pay
prejudgment interest, if there are refunds
on overpaid fees
Argued that the class should not be a class
action, but limited to the five individuals
187 Trial in Anchorage during the summer where
they explored the issue of what is the
state's annual fisheries budget.
Presented to expert witnesses six different
budget categories:
1. Operating budget expenditures - direct
salaries
2. Indirect operating expenses - support
staff
They also asked the court to include the
following four categories and the court
denied them:
3. Capital expenditures - for example,
fish hatcheries and harbors
4. Population decrease without commercial
fisherman in the state the costs that
the state would have to bear would
decrease
5. Figures on the amount the state
subsidizes the loan program
6. Cost benefit analysis
230 They ran the numbers for fiscal year 1996
and having all of the cost categories being
aloud the permissible differential, for
that year, would have been $571, which is
more than the maximum differential for any
one permit, but with the supreme court
denying those categories the actual
permissible differential for 1996 was only
$155.
Refunds for that year alone - $931,000.
Trying to move through the trial court and
get a final judgment so the state can go
back and appeal the different issues, such
as the four cost categories denied them.
By March 15 have a total figure for refunds
due.
Law also requires to send out a notice to
those people and how many are interested in
refunds (11,000 known non-resident
fisherman)
261 Wanted to bring this to your attention
because the liability of the refund and the
supreme court headlines on the state -
pleading the $30 million in refunds
277 Co-Chair Donley Asked Mr. White if he prepared the summary?
Mr. White Yes.
281 Senator Austerman Going to make any recommendations at this
time?
284 Mr. White He indicated that he spoke with some
representatives. At this point the only
change is the 3 - 1 ratio to something that
incorporates the formula
Look at gross budget figures and determine
what the permissible differential is and
see if that number could be adjusted
periodically.
298 Senator Austerman Recommending that?
300 Mr. White He thinks that eventually they are going to
have to do that.
Recommend that, because the structure of
formula - the supreme court has given a set
formula that flows from the U.S. Supreme
Court decisions and that is going to govern
the differential in the future; therefore,
the sooner they change it the better.
Added that if they are paying more now they
would stop the potential refunds they would
have to pay in the future.
305 Senator Leman Executive Session?
Co-Chair Donley Not unless there is really a need.
309 Senator Leman He opined that the formula is flawed -
flawed in the application
He believes that if they want a concept of
a reallocation of costs to be in the
formula there is a different way to come at
it.
Happy to share with you.
If you can't appeal it to the state than
can't appeal to the U.S. Supreme Court.
322 Senator Olson Final argument on the summer trial court
decision?
326 Mr. White We won on some of the issues and they won
some issues - 60/40 split in favor of the
class.
334 Senator Olson How much longer do you think the anguish is
going to go on?
337 Mr. White Trying to push this to the Supreme Court as
soon as possible - hope to get a decision
by a year from this summer. At that point
pretty much all the issues will be clear;
it will be a matter of running numbers -
good idea about liability at that point.
347 Senator Austerman Liability going back 18 years?
348 Mr. White Yes, their liability starts December 1984,
so refunds plus interest would go back to
that point.
350 Senator Austerman Have you looked at those numbers? He
pointed out that in the last five years
there has been a cutting of the budget. He
wondered if they expect liability back to
that point or within that 18 years would
there be a number of years without
liability?
355 Mr. White He indicated that there was a better
picture in earlier years in terms of the
interest owed, because they had higher
commercial fisheries budgets bringing the
differential down.
Unfortunately for the earlier years they
are paying interest on those refunds.
It is an individual year basis and they
have to reconstruct an estimate and
extrapolate what they have spent.
369 Senator Hoffman Lawsuit on the differential and individual
right to pursue a vocation. What
implications does this case have on the
differential of other licenses that the
state has.
373 Mr. White He noted that it does have implications for
a commercial vocational pursuit, but not
for sport hunting and sport fishing
licenses. The state is able to have
different bag limits and seasons for sport
hunting and sport fishing.
381 Senator Hoffman Guiding licenses?
382 Mr. White Yes, they would be implicated by this.
384 Co-Chair Donley He wondered if in their research they
identified other states that had adopted as
restrictive a measure as Judge Michalski in
his decision.
387 Mr. White Didn't find other states that had to follow
a formula - only one close was a challenge
by Florida in 1983 against Louisiana, but
it was settled before it went to trial so
there is no legal precedent.
Other example would be charging students
non-resident fees.
398 Co-Chair Donley Quite a few other states that charge higher
for non-resident commercial fisherman fees
than resident?
399 Mr. White Correct. Some states charge as much as 11
times higher and some states actually
prohibit non-residents from participating,
but no one has challenged those states.
Fisheries are invaluable so the non-
resident fisherman does not feel the need
to challenge the state, whereas in Alaska
the fisheries have such value.
He indicated that he made that point to the
Alaska Supreme Court.
407 Co-Chair Donley Thank you for your report.
409 Adjourned at 9:34 a.m.
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