Legislature(1993 - 1994)

05/03/1993 02:50 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    SENATE FINANCE COMMITTEE                                   
                           May 3, 1993                                         
                            2:50 p.m.                                          
  SFC-93, #71, Side 2 (475-end)                                                
  SFC-93, #73, Side 1 (000-end)                                                
  SFC-93, #73, Side 2 (000-end)                                                
  SFC-93, #75, Side 1 (000-end)                                                
  SFC-93, #75, Side 2 (000-end)                                                
  SFC-93, #76, Side 1 (000-end)                                                
  SFC-93, #76, Side 2 (575-381)                                                
  CALL TO ORDER                                                                
  Senator  Drue  Pearce,  Co-chair, convened  the  meeting  at                 
  approximately 2:50 p.m.                                                      
  All members (Co-chairs Pearce and  Frank and Senators Jacko,                 
  Kelly, Kerttula, Rieger, and Sharp) were present.                            
  ALSO  ATTENDING:    Senator  Miller; Representative  Larson;                 
  Representative    Moses;    Representative    Gary    Davis;                 
  Representative  Parnell;  Former  Senator   Mike  Szymanski;                 
  Attorney General Charlie Cole; Charles Mahlen, Commissioner,                 
  Dept. of Labor;  Paul Fuhs, Commissioner, Dept.  of Commerce                 
  and   Economic   Development;   C.E.   Swackhammer,   Deputy                 
  Commissioner, Dept. of Public Safety; Rod Mourant, Assistant                 
  Commissioner, Dept.  of  Revenue;  Tom  Williams,  Director,                 
  Permanent  Fund Dividend  Division; Dept.  of Revenue;  Jeff                 
  Koenings,   Director,   Division  of   Commercial  Fisheries                 
  Management and Development,  Dept. of Fish and  Game; Shelby                 
  Stastny,  Director, Office  of Management  and  Budget; Dave                 
  Williams, Dept. of Health and  Social Services; Dana LaTour,                 
  Special Assistant,  Dept. of  Corrections; Christine  Niemi,                 
  Educational  Program  Support  Division,  Special  Education                 
  Program,  Dept. of  Education;  Kelly  Sharp, Loan  Manager,                 
  Division  of  Investments, Dept.  of  Commerce and  Economic                 
  Development; Carl  A. Meyer,  Chief of  Appeals, Income  and                 
  Excise  Audit Division;  Dept.  of  Revenue;  Jerry  McLune,                 
  United  Fishermen  of  Alaska;  Dean  Paddock,  Bristol  Bay                 
  Driftnetters   Association;   Joe  Blum,   American  Factory                 
  Trawlers   Association;   Harvey   Samuelson,   BBED   Corp,                 
  Dillingham, Alaska; Susan Burke of Gross and Burke on behalf                 
  of the American  Factory Trawlers Association;  Mark Ernest,                 
  City Manager,  Unalaska; Stephanie  Matson, Council  Member,                 
  Unalaska;   Rick   Lauber,   Pacific    Seafood   Processors                 
  Association;  Mike  Greany,  Director,  Legislative  Finance                 
  Division;  Dave  Tonkavich,   fiscal  analyst,   Legislative                 
  Finance  Division;  Paula  Conru,  aide  to   Representative                 
  Mulder;  Jack Phelps,  aide  to  Representative Kott;  Molly                 
  McCammon,  aide   to  Representative  Moses;  and  aides  to                 
  committee members and other members of the legislature.                      
  ALSO  PARTICIPATING   VIA  TELECONFERENCE:     Jim   Forbes,                 
  Assistant Attorney General, Fair Practices Section, Dept. of                 
  Law,  Anchorage,  Alaska;  Phil  Chitwood,  Tyson  Seafoods,                 
  Seattle,  Washington;  Thorn Smith,  North  Pacific Longline                 
  Association, Seattle, Washington.                                            
  SUMMARY INFORMATION                                                          
  HB 109    -    BLOOD TESTS ON SEX CRIME PERPETRATORS                         
                 Testimony was  provided by Jack  Phelps, aide                 
                 to Rep. Kott.  CSHB 109(Jud) was REPORTED OUT                 
                 of  committee with a  $45.5 fiscal  note from                 
                 the  Dept.  of  Health  and  Social  Services                 
                 (Nursing),  a $27.9  note  from the  Dept. of                 
                 Health  and  Social  Services (Laboratories),                 
                 and zero notes from the  Dept. of Law and the                 
                 Dept. of Corrections.                                         
  HB 113    -    CHARITABLE & TELEPHONIC SOLICITING/SALES                      
                 Teleconference testimony was provided  by Jim                 
                 Forbes  of the Dept. of Law.   CSHB 113 (Fin)                 
                 was REPORTED  OUT of  committee  with a  zero                 
                 fiscal note from the Dept. of Law.                            
  HB 133    -    DEFINITION OF VALUE FOR FISHERIES TAX                         
                 Testimony was  presented by Rep.  Moses.  The                 
                 bill   was   subsequently  REPORTED   OUT  of                 
                 committee with a  fiscal note from  the Dept.                 
                 of Revenue showing  zero cost and revenue  of                 
  HB 136    -    DRUNK DRIVING AND BREATH TEST OFFENSES                        
                 Testimony was presented by  Paula Conru, aide                 
                 to Rep. Mulder  and Dana LaTour of  the Dept.                 
                 of  Corrections.    SCS  CSHB 136  (HES)  was                 
                 REPORTED OUT of committee  with the following                 
                 fiscal notes:                                                 
                      Law                           0                          
                      Public Safety (Drivers)       0   $108.0                 
                      Public Safety (Troopers)      0                          
                      Administration (Advocacy)     0                          
                      Administration (Defender)     0                          
                      Corrections               $1,043.6                       
  HB 171    -    MEDICAID COVERAGE FOR HOSPICE CARE                            
                 Testimony was  presented by  Rep. Larson  and                 
                 Dave  Williams of  the  Dept.  of Health  and                 
                 Social Services.  CSHB 171 (Fin) was REPORTED                 
                 OUT  of committee  with a  $10.0 fiscal  note                 
                 from the Dept. of Health and Social Services.                 
  HB 225    -    NOTICE OF APPROPRIATIONS ON PFD'S                             
                 Testimony was presented by Rep. Parnell.  The                 
                 bill was then REPORTED OUT of committee  with                 
                 a zero fiscal note from the Dept. of Revenue.                 
  HB 249    -    ELECTRICAL/MECHANICAL TRADESPERSONS                           
                 Testimony was  presented by  Rep. Gary  Davis                 
                 and  Commissioner  Mahlen  of  the  Dept.  of                 
                 Labor.  SCS CSSSHB 249 (L&C) was REPORTED OUT                 
                 of committee  with a $118.6 fiscal  note from                 
                 the Dept. of Labor and  a note from the Dept.                 
                 of Commerce and Economic  Development showing                 
                 an operating reduction of  ($5.9) and reduced                 
                 revenues of ($67.0).                                          
  HB 252    -    REFINANCING COMMERCIAL FISHING LOANS                          
                 Testimony was  provided by Rep.  Moses, Jerry                 
                 McLune,  Kelly  Sharp,   Dean  Paddock,   and                 
                 Commissioner Fuhs.   SCS HB 252 (Finance) was                 
                 REPORTED  OUT of committee  with a  "do pass"                 
                 recommendation  and   $41.1  Senate   Finance                 
                 Committee  fiscal  note  for  the  Dept.   of                 
                 Commerce and Economic Development.                            
  HB 264    -    FISHERY RESOURCE LANDING TAX                                  
                 A  lengthy  teleconference  was  had.    Rep.                 
                 Moses, Molly  McCammon, Carl  Myer, Jo  Blum,                 
                 Susan Burke, Harvey Samuelson, Phil Chitwood,                 
                 Thorn  Smith,  Mike  Szymanski, Mark  Ernest,                 
                 Stephanie Matson, Rick Lauber, Jeff Koenings,                 
                 and Dean Paddock  testified.  CSHB 264  (Fin)                 
                 was HELD in committee for additional review.                  
  CS FOR HOUSE BILL NO. 113(FIN)                                               
       An  Act regulating the solicitation of contributions by                 
       charitable organizations  and paid  solicitors and  the                 
       solicitation of sales by telephonic means; and amending                 
       Alaska Rules of Civil Procedure 79 and 82.                              
  Co-chair  Pearce directed that CSHB 113  (Fin) be brought on                 
  for  discussion  and  referenced a  TELECONFERENCE  link  to                 
  Senator Rieger asked if the  proposed bill would impact  the                 
  credit card  purchase of airline tickets by  telephone.  JIM                 
  FORBES, Assistant Attorney General, Fair Practices  Section,                 
  Dept. of Law,  responded via teleconference  from Anchorage.                 
  He explained that the  bill would not apply  to transactions                 
  where the  customer initiates  the telephone call,  provided                 
  that  it is not in  response to a  specific request that the                 
  customer initiate the call.                                                  
  Co-chair Frank  directed attention  to a  proposed Amendment                 
  No.    1    relating   to    language    under   "Prohibited                 
  Representations" at page  3, lines 13  through 19.  He  then                 
  noted   that   present   language  appears   to   prevent  a                 
  telemarketer  from  presenting facts  that  are true.   That                 
  appears to overreach a  bit in light of other  "cooling off"                 
  provisions within the  bill.   Mr. Forbes acknowledged  that                 
  the question represents  a policy call.   He explained  that                 
  existing  language  would be  most  helpful in  the consumer                 
  protection context.  He pointed  to the high-pressure nature                 
  of telephonic sales and advised that the wording is based on                 
  legislation in other states.   Ability of a telemarketer  to                 
  advise  that  his   or  her  organization  is   licensed  or                 
  registered with the state inspires a degree of confidence in                 
  the customer  that is  unwarranted under  the circumstances.                 
  While proposed language  in Amendment No. 1 does  not "kill"                 
  the effectiveness of the bill, it waters it down.                            
  Extended discussion of the issue followed between Mr. Forbes                 
  and Co-chair Frank.  Mr. Forbes  stressed that the intent of                 
  the drafter was to  ensure that a telemarketer does  not use                 
  registration  with   the  state  as  leverage   against  the                 
  Co-chair  Frank advised that  he was seeking  to ensure that                 
  contractors and other persons and businesses licensed by the                 
  state  are  not precluded  from  advising customers  of that                 
  fact.  Mr. Forbes responded that presentments by contractors                 
  and other licensed  businesses would not be  precluded under                 
  the proposed legislation.  He acknowledged that perhaps that                 
  fact could  be more  clearly stated.   Co-chair  Frank asked                 
  that  Mr.  Forbes draft  language that  could be  offered in                 
  Rules Committee or  on the floor of the Senate.   Mr. Forbes                 
  directed  attention  to  page  3,  line  15,  and  suggested                 
  addition of "by  reason of registration under  AS 45.65.010"                 
  after "seller" and before "a license."                                       
  Representative  Larson  voiced  his  understanding that  the                 
  contractor  used  in  the  foregoing  example would  not  be                 
  covered by the bill.  Mr. Forbes directed attention to pages                 
  4 and 5 and  noted eighteen listed exemptions.   He stressed                 
  that it is  not the  intent of the  legislation to  restrict                 
  individuals  or   businesses  that  are   already  otherwise                 
  licensed or registered by the state, regulated by the state,                 
  or governed by a board  or commission with existing consumer                 
  protection remedies.  The bill seeks to  cover entities that                 
  are not presently registered, such as telemarketers.                         
  Co-chair Frank said  he would withdraw Amendment  No. 1 with                 
  the assurance that only telemarketer-type registration would                 
  be covered  by the  "Prohibited Representations" section  of                 
  the bill.   Mr. Forbes concurred  in that intent.   Co-chair                 
  Frank asked that the intent be put in writing.                               
  Senator Sharp asked if the  proposed legislation would apply                 
  to television channels marketing goods  for sale. Mr. Forbes                 
  said that home shopping channels have not been the source of                 
  fraud.  The  proposed legislation seeks to  cover telephonic                 
  sales and instances  in which an  individual is informed  by                 
  mail that he or  she has won a prize and is  asked to call a                 
  phone number  to claim  it.   Generally, when  that call  is                 
  made,  the  customer  is pressured  into  sending  a certain                 
  amount of cash to  secure the prize and in  doing so becomes                 
  the victim of fraud.                                                         
  Co-chair Frank MOVED that CSHB 113 (Fin) pass from committee                 
  with individual recommendations  and the accompanying fiscal                 
  note.  No objection  having been raised, CSHB 113  (Fin) was                 
  REPORTED  OUT  of  committee  with  a  unanimous  "do  pass"                 
  recommendation and zero fiscal note from the Dept. of Law.                   
  CS FOR HOUSE BILL NO. 171(FIN)                                               
       An Act providing  coverage for  hospice care under  the                 
       Medicaid program;  reordering the  priorities given  to                 
       optional  services  under  the  Medicaid  program;  and                 
       providing for an effective date.                                        
  Co-chair Pearce directed  that CSHB 171 (Fin)  be brought on                 
  for  discussion.    REPRESENTATIVE  LARSON  remained  before                 
  committee.  He  explained that the legislation  would extend                 
  coverage of hospice services to Medicaid eligible adults who                 
  do not qualify  for Medicare.   Hospice care is presently  a                 
  Medicaid covered service  for children  and is available  to                 
  people who  qualify for Medicare.   The proposed  bill would                 
  fill the current void in extension of that coverage.                         
  DAVE  WILLIAMS, Division  of  Medical  Assistance, Dept.  of                 
  Health  and Social  Services, came before  committee voicing                 
  support for the bill.  He explained that coverage would help                 
  meet the  needs of terminally ill individuals who are likely                 
  to die within six months.                                                    
  Senator Kerttula  attested to past  experience in attempting                 
  to obtain care for  a terminally ill relative.   He stressed                 
  need to simplify  the present system.  Mr. Williams observed                 
  that  the  hospice option  allows  for consideration  of the                 
  condition of those who are terminally ill.   He acknowledged                 
  that  they  not only  need services  at  home but  they need                 
  services delivered "in a way that is compassionate."                         
  In response to a  question from Senator Kelly,  Mr. Williams                 
  pointed to the  $10.0 fiscal note  from the Dept. of  Health                 
  and  Social Services and  explained that it  relates only to                 
  the  cost  of changing  the state  system  to allow  for the                 
  billing of extended hospice services under Medicaid.                         
  Discussion followed between  Senator Kelly and  Mr. Williams                 
  concerning the priority ranking of medical services.                         
  Senator  Kerttula voiced praise  for those providing hospice                 
  services,  advising that  they  are competent,  professional                 
  people  who  have  great compassion.    He  reiterated need,                 
  however,  to  streamline the  bookkeeping  effort associated                 
  with the service.                                                            
  Senator Kerttula then  MOVED that CSHB  171 (Fin) pass  from                 
  committee  with individual  recommendations.   No  objection                 
  having  been raised,  CSHB  171 (Fin)  was  REPORTED OUT  of                 
  committee with a $10.0 fiscal note  from the Dept. of Health                 
  and Social Services.  Senators Jacko and Kerttula signed the                 
  committee report with a "do pass" recommendation.  Co-chairs                 
  Pearce  and  Frank  and Senators  Kelly,  Rieger,  and Sharp                 
  signed "no rec."                                                             
  CS FOR HOUSE BILL NO. 109(JUD)                                               
       An Act relating to blood tests for persons charged with                 
       sex offenses; and providing for an effective date.                      
  Co-chair Pearce directed  that CSHB 109 (Jud)  be brought on                 
  for discussion.   JACK PHELPS, aide to  Representative Kott,                 
  came before committee.  He termed the proposed legislation a                 
  "victim's right bill" and expressed  his belief that victims                 
  of sexual assault should have the right to seek some measure                 
  of  relief  through  determination  of  whether or  not  the                 
  attacker  is infected with  sexually transmitted  diseases.                  
  Through  petition by the  victim, courts may  order that the                 
  attacker provide blood samples for testing.                                  
  Mr. Phelps noted a connection between the  proposed bill and                 
  federal moneys provided  through the  federal Crime  Control                 
  Act of  1990.  The Dept.  of Public Safety could  lose 10%--                 
  $187.0  of its crime control grant moneys if the legislation                 
  is not passed by October of 1993.  Funding from  states that                 
  do not comply will be redistributed to  those that do.                       
  Co-chair Pearce voiced her  understanding that the  attacker                 
  has to be changed with the  assault before the proposed bill                 
  would come into  play.  Mr  Phelps concurred.  He  explained                 
  that  the  petition  initiated  by  the  victim  would  be a                 
  separate  court  action.   The court  would  have to  make a                 
  finding that the  alleged perpetrator committed a  crime and                 
  that  the  crime included  sexual penetration.   Based  on a                 
  finding of  probable cause, the  court would then  order the                 
  blood test.                                                                  
  In response to  an additional question from  Senator Rieger,                 
  Mr. Phelps explained  that a "charge" against  an individual                 
  results from presentment or indictment by a grand jury or by                 
  sworn  statement by  an officer  of  the law.   Most  of the                 
  crimes  covered by  the bill  are felony  charges which  are                 
  generally brought by indictment.                                             
  Senator Rieger next  inquired concerning the reason  for the                 
  seven-day  waiting period,  after arrest,  during which  the                 
  court may not order  a test.  Mr. Phelps  explained that the                 
  intention  of the waiting  period is to  ensure that charges                 
  have  actually   been  filed,  the  defendant  has  obtained                 
  counsel,  and  it  appears  unlikely  the  charges  will  be                 
  Senator Rieger directed attention to page  3, lines 2 and 3,                 
  and inquired  concerning "adjudication  by  the court  other                 
  than  a  conviction" and  asked  if plea  bargains  would be                 
  covered by the bill.                                                         
  End, SFC-93, #71, Side 2                                                     
  Begin, SFC-93, #73, Side 1                                                   
  Mr. Phelps responded that adjudication other than conviction                 
  generally  means that the individual has  been acquitted.  A                 
  plea  bargain would  involve some  form  of guilty  plea and                 
  would not remove the defendant from coverage by the proposed                 
  Senator Rieger directed attention to page  4, lines 4 and 5,                 
  and asked why  results of the  test would not be  admissible                 
  evidence in the  criminal proceeding.  Mr.  Phelps responded                 
  that the purpose  of the test  is to provide information  to                 
  victims.  It is not intended  to be used as evidence against                 
  an individual.    The proposed  bill  would not  preclude  a                 
  prosecutor from requesting a test for evidentiary  purposes.                 
  In  response  to  a  further  inquiry  from  Senator  Rieger                 
  regarding language at page  4, line 3, Mr. Phelps  explained                 
  that with court  allowance, the  victim could disclose  test                 
  information  to  the  victim's   spouse,  immediate  family,                 
  persons occupying  the same household  as the  victim, or  a                 
  person in  a dating,  courtship, or  engagement relationship                 
  with the victim.  That language was added to the bill at the                 
  request  of the  Council on  Domestic Violence  and   Sexual                 
  Assault.  Senator Rieger questioned whether the language was                 
  properly worded  and suggested that  Representative Kott and                 
  his staff further review the provision.                                      
  Senator  Jacko  asked if  the court  is  required to  hold a                 
  hearing if the defendant objects to the testing.  Mr. Phelps                 
  responded negatively.  He explained that the bill allows the                 
  court to rely upon evidence gathered by the grand jury or at                 
  preliminary  hearing  if  that  evidence  is  sufficient  to                 
  convince the court  that the defendant was  the perpetrator.                 
  In the absence  of that  evidence, the court  could hold  an                 
  additional hearing, based  on petition from the  victim, and                 
  take  testimony to  make  a  probable  cause  determination.                 
  Senator Jacko asked if the defendant would be required to be                 
  present or represented at the hearing.  Mr. Phelps responded                 
  negatively, indicating that indictments are often ex  parte.                 
  Co-chair Pearce called for additional testimony on the bill.                 
  None  was  forthcoming.     She  then  queried   members  on                 
  disposition.   Senator Rieger MOVED that CSHB 109 (Jud) pass                 
  from  committee  with  individual  recommendations  and  the                 
  accompanying fiscal notes.  No objection having been raised,                 
  CSHB  109 (Jud)  was  REPORTED OUT  of  committee with  zero                 
  fiscal notes from the Dept. of Law and Dept. of Corrections,                 
  a $45.5 note  from the Dept.  of Health and Social  Services                 
  (Nursing), and a  $27.9 note  from the Dept.  of Health  and                 
  Social Services (Laboratories).  Co-chairs Pearce  and Frank                 
  and Senators Rieger  and Sharp  signed the committee  report                 
  with  a  "do  pass"  recommendation.    Senators  Jacko  and                 
  Kerttula signed  "no rec."   Senator  Kelly was  temporarily                 
  absent from the meeting and did not sign.                                    
  HOUSE BILL NO. 133                                                           
       An Act amending the definition  of `value' for purposes                 
       of administration of fisheries taxes; and providing for                 
       an effective date.                                                      
  Co-chair  Pearce directed  that  HB 133  be  brought on  for                 
  discussion.     REPRESENTATIVE   CARL   MOSES  came   before                 
  committee.  He explained that HB  133 is similar to existing                 
  law, but it  restructures the definition of  "value" used in                 
  administering fisheries  taxes to  enhance clarity.   It  is                 
  identical  to  CSHB 448  (Res) introduced  by Representative                 
  Gail Phillips last  year, with  the exception of  clarifying                 
  language recommended  by  the Division  of  Legal  Services.                 
  There is no known opposition to the bill.                                    
  In  the  past, processors  and  fishermen have  disputed the                 
  definition of "value" when paying salmon enhancement and raw                 
  fisheries taxes.  The argument  is that bonuses and delivery                 
  costs are not part of the actual amount paid for fish.  This                 
  interpretation leaves an opening for processors to pay lower                 
  prices.  They make  up for the low  price by giving  bonuses                 
  for services such as delivery or handling.  HB 133 clarifies                 
  what  services  and forms  of payment  are subject  to these                 
  taxes.   The  bill would take  effect on  January 1,  1994.                  
  Representative Moses urged passage.                                          
  Co-chair Pearce called  for additional testimony.   None was                 
  forthcoming.  She then queried members regarding disposition                 
  of  the bill.  Senator Kerttula  MOVED that HB 133 pass from                 
  committee  with individual  recommendations.   No  objection                 
  having been  raised, HB  133 was  REPORTED OUT  of committee                 
  with a  zero fiscal  note from  the Dept.  of Revenue.   Co-                 
  chairs  Pearce  and Frank  and  Senators Jacko,  Rieger, and                 
  Sharp  signed  the   committee  report  with  a   "do  pass"                 
  recommendation.  Senators Kelly and  Kerttula had moved away                 
  from the committee table and did not sign the bill as it was                 
  CS FOR HOUSE BILL NO. 136(FIN)                                               
       An Act relating  to revocation of and limitations  on a                 
       driver's  license;  to the  offenses  of  driving while                 
       intoxicated and  refusal to  submit to  a breath  test;                 
       imposing a limited license fee; amending Alaska Rule of                 
       Civil Procedure  32(b); and providing for  an effective                 
  Co-chair Pearce directed that  CSHB 136 (Fin) be  brought on                 
  for discussion.  PAULA CONRU, aide to Representative Mulder,                 
  came  before committee.  She explained that the bill derives                 
  from Alaska Sentencing Commission recommendations for use of                 
  alternative sentencing.   The  purpose of  the bill  is two-                 
       1.   To crack down  on DWI  offenders by offering  more                 
  serious        immediate punishment.                                         
       2.   To  relieve  some  of  the  financial   burden  of                 
            by requiring that  offenders pay  up to $1,000  of                 
            the cost of their incarceration.                                   
  The bill would  require first and second-time  DWI offenders                 
  and those  who refuse to  submit to  a breath test  to serve                 
  time in community residential centers and  perform community                 
  work service while  at the center.   The bill also  requires                 
  that  all   DWI  offenders  pay   for  the  cost   of  their                 
  incarceration.    Unpaid  costs may  be  collected  from the                 
  offender's  permanent  fund  dividend check.    The  cost of                 
  incarceration, as  defined in  the bill,  will be  a uniform                 
  average  cost as  determined and  prescribed by  regulations                 
  from the Dept. of  Corrections.  All prisoners will  pay the                 
  same rate no matter where they are incarcerated.                             
  Ms. Conru pointed to provisions  dealing with limitations on                 
  individual driver's licenses and  noted that, under  current                 
  law, a  person with  up to  six  DWI offenses  may obtain  a                 
  limited license.   The proposed bill restricts  that ability                 
  to first  offenders only.   Those  who refuse  to submit  to                 
  breath tests would not qualify.   An application fee of $100                 
  would be  levied for  a limited  license.   Ms. Conru  noted                 
  support from the Dept.  of Law, Dept. of Public  Safety, and                 
  Dept. of Corrections.                                                        
  DANA LA TOUR, Special Assistant,  Dept. of Corrections, came                 
  before committee  in response  to a  question from  Co-chair                 
  Frank regarding the department's $1,043.6  fiscal note.  She                 
  advised that  projected funding represents  program receipts                 
  derived  from  incarceration payments  made by  offenders to                 
  cover the cost of their care.  Ms. LaTour directed attention                 
  to page two of the fiscal  note and referenced formulas used                 
  to develop the $1,043.6 figure.   She said that the proposed                 
  bill is not expected to result in  a change in the number of                 
  convictions.  It will merely make offenders pay for the cost                 
  of  their  incarceration.   The  department  will,  in turn,                 
  utilize payments  to purchase  community residential  center                 
  beds for DWI offenders.                                                      
  Senator  Rieger  asked  if  the  amount established  as  the                 
  uniform  cost  of  bed  space  would  include  the  cost  of                 
  indigents  unable  to pay.    Ms.  LaTour advised  that  the                 
  Commissioner could take that cost into consideration.                        
  Co-chair Pearce called  for additional testimony.   None was                 
  forthcoming.  She then queried members regarding disposal of                 
  the bill.  Senator  Sharp MOVED that SCS CSHB 136 (HES) pass                 
  from committee with accompanying fiscal notes.  No objection                 
  having been raised, SCS  CSHB 136 (HES) was REPORTED  OUT of                 
  committee with the following fiscal notes:                                   
       Law                                     0                               
       Public Safety (Drivers)                 0        $108.0                 
       Public Safety (Troopers)                0                               
       Administration (Public Advocacy)        0                               
       Administration (Defender)               0                               
       Corrections                        $1,043.6                             
  Co-chairs Pearce  and Frank  and Senators  Rieger and  Sharp                 
  signed the committee report with a "do pass" recommendation.                 
  Senator Jacko signed "no rec."  Senators Kelly  and Kerttula                 
  had left the meeting and did not sign.                                       
  HOUSE BILL NO. 225                                                           
       An Act  relating to  notice  of certain  appropriations                 
       from the dividend fund.                                                 
  Co-chair Pearce  directed  that HB  225  be brought  on  for                 
  discussion.  REPRESENTATIVE  PARNELL came before  committee.                 
  He  explained  that the  bill  was  sponsored by  the  House                 
  Finance Committee as a  result of work done by the  Dept. of                 
  Public Safety  budget  subcommittee.    Under  present  law,                 
  felons in Alaska  do not  receive permanent fund  dividends.                 
  Those dividends are instead appropriated to two programs:                    
       1.   The sex offender treatment program in the Dept. of                 
       2.   The crime victims' compensation fund.                              
  Approximately   $1.6  million   from  the   felon   pool  is                 
  appropriated to  the  above programs,  leaving  a  remaining                 
  balance of $808.0. House and  Senate budget conferees agreed                 
  to permit $750.0  of that balance to flow  to the council on                 
  domestic violence and sexual assault.  It is  thus necessary                 
  to  exempt  from notice  funds  to  be  appropriated to  the                 
  council.  The proposed bill provides that exemption.                         
  Co-chair Pearce called for additional questions or testimony                 
  on the bill.   Neither were  forthcoming.  She then  queried                 
  members regarding disposition.  Co-chair Frank MOVED that HB
  225 pass from committee  with individual recommendations and                 
  the zero fiscal note.   No objection having been  raised, HB
  225 was REPORTED  OUT of committee  with a zero fiscal  note                 
  from the Dept. of  Revenue.  All members present  signed the                 
  committee report with a "do  pass" recommendation.  Senators                 
  Kelly and Kerttula were absent and did not sign.                             
  CS FOR HOUSE BILL NO. 235(FIN)                                               
       An  Act relating to  educational programs  and services                 
       for  children with  disabilities and  other exceptional                 
       children and to persons with  a handicap; and providing                 
       for an effective date.                                                  
  Co-chair Pearce  directed that CSHB 235 (Fin)  be brought on                 
  for  discussion.    CHRISTINE  NIEMI,  Educational   Program                 
  Support  Division,  Special   Education  Program,  Dept.  of                 
  Education, came before committee.  She explained that HB 235                 
  was introduced by Representative Bunde at the request of the                 
  department.  Passage will allow  for compliance with federal                 
  regulations  in   accordance  with   the  Individuals   with                 
  Disabilities  Education  Act.    Approximately  $8,300.0  in                 
  federal  funds  are  at  stake.     Ms.  Niemi  advised   of                 
  correspondence from the  federal government indicating  that                 
  the 1994  grant award cannot be released until compliance is                 
  achieved.  The following required revisions to state law are                 
  embodied within the proposed bill:                                           
       1.   Amendments to and clarification of the hearing                     
       2.   Amendments to withdrawal of consent provisions and                 
            amendment of the definition of consent.                            
       3.   Addition of rehabilitation counseling services.                    
       4.   Addition of  autism and traumatic brain  injury as                 
            a definition of "education records."                               
  Co-chair Pearce called for additional questions or comments.                 
  Senator Rieger advised  that the proposed bill  was reviewed                 
  at  length  in  the  Senate  Health, Education,  and  Social                 
  Services Committee.  He  then MOVED that SCS CSHB  235 (HES)                 
  pass  from  committee  with  individual recommendations  and                 
  accompanying fiscal notes.  No objection having been raised,                 
  SCS CSHB 235 (HES)  was REPORTED OUT of committee  with zero                 
  notes  from  the   Dept.  of  Education  and  the  Dept.  of                 
  Administration.   All members  present signed the  committee                 
  report with a "do pass" recommendation.   Senators Kelly and                 
  Kerttula were absent and did not sign.                                       
  Co-chair  Pearce  directed  that   the  meeting  be  briefly                 
                       RECESS - 3:55 P.M.                                      
                      RECONVENE - 4:15 P.M.                                    
  CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 249(STA) am                     
       An Act reestablishing the Board of Electrical Examiners                 
       and  extending  the termination  date  of the  Board of                 
       Mechanical  Examiners;  relating   to  electrical   and                 
       mechanical   administrators;   and  providing   for  an                 
       effective date.                                                         
  Co-chair Pearce directed that CSSSHB  249 (STA)am be brought                 
  on for discussion.   REPRESENTATIVE  GARY DAVIS came  before                 
  committee and directed  attention to  SCS CSSSHB 249  (L&C).                 
  He  explained  that  the  proposed  bill  would  address  an                 
  emergency  which  will  occur  August  31,  1993,  when  all                 
  electrical   administrators'   licenses--approximately   600                 
  statewide--will expire.   The legislation reestablishes  the                 
  board  of  electrical examiners  which  was sunset  June 30,                 
  1992.  Reestablishment  will allow  for renewal of  licenses                 
  slated to  expire in  August.   In the  absence of  renewal,                 
  there will be  no electric  administrators to ensure  proper                 
  installation of electrical systems throughout the state.                     
  Inclusion of the mechanical examiner board is simply a house                 
  cleaning measure intended  to alleviate  a similar fate  for                 
  licensed mechanical administrators.  The mechanical examiner                 
  board is scheduled to expire June 30, 1993.                                  
  Electrical  administrators  are master  electricians charged                 
  with overseeing proper installation of  electrical work done                 
  by  journeymen   and  apprentice  electricians.    They  are                 
  certified and licensed  by the  state to provide  protection                 
  and  safety to the public and  property.  Without electrical                 
  administrator   oversight,  there   is  increased   risk  of                 
  improperly installed electrical systems.                                     
  Co-chair  Pearce  acknowledged need  to provide  a licensing                 
  function for  electrical and mechanical administrators.  She                 
  questioned, however,  reestablishment  of  the  two  boards.                 
  Representative  Davis advised  that  reestablishment of  the                 
  electrical  board  was  viewed  as  the  vehicle  to  ensure                 
  movement   of   the  bill.      Senator  Kelly   voiced  his                 
  understanding  that the proposed legislation effects a "one-                 
  year fix."  The legislature will have to deal with the issue                 
  on a more  long-term basis next year.   Representative Davis                 
  concurred, pointing to  the emergency nature of  the current                 
  situation as cited in  the position paper from the  Dept. of                 
  Labor.    The  department will  be  reviewing  mechanisms to                 
  "smooth out the process" during the interim.                                 
  Co-chair Pearce again asked why a board was necessary rather                 
  than merely a  licensing function.   She further  questioned                 
  transfer  of  electrical  administrator  licensing from  the                 
  Dept. of  Commerce and Economic Development  (which oversees                 
  all licensing) to the Dept.  of Labor.  Representative  Gary                 
  Davis  explained  that  the  licensing  function  was  being                 
  transferred to  the Dept. of Labor since that department has                 
  enforcement authority.  The Governor's  Office requested the                 
  CHARLES MAHLEN,  Commissioner, Dept.  of Labor,  came before                 
  committee in  response to concerns  regarding the  transfer.                 
  He expressed his  belief that "licensing for  the occupation                 
  should be within the occupation,"  (i.e., the Dept. of  Fish                 
  and  Game  should issue  hunting  and fishing  licenses, the                 
  Dept.  of  Public  Safety should  issue  drivers' licenses).                 
  Pertinent departments have the expertise for enforcement and                 
  control.  That is different from professional licenses under                 
  the Dept. of Commerce and  Economic Development.  Electrical                 
  and  mechanical licensing  does not  belong under  Commerce.                 
  The Dept. of  Labor already  issues journeymen licenses  and                 
  regulates the occupation.                                                    
  Commissioner Mahlen noted that the original board was sunset                 
  because of lack  of regulation enforcement within  the Dept.                 
  of Commerce  and Economic  Development.   The proposed  bill                 
  represents a "one-year fix"--an attempt  to get licensing in                 
  the proper department while working out "the fine points."                   
  Co-chair  Pearce observed  that the  boards and  commissions                 
  task force recommended the above-noted sunset.  Commissioner                 
  Mahlen advised of  many complaints  of lack of  enforcement.                 
  There  was,  however,  no  way  to  transfer  the  licensing                 
  function.  That was one of the reasons for sunset.  Co-chair                 
  Pearce acknowledged  need to reestablish licensing but again                 
  questioned need for the board.                                               
  Senator Kerttula directed  attention to  page 2, section  7,                 
  lines 16 through  18, and raised  a question concerning  the                 
  exemption.   Representative  Davis  attested  to  exclusions                 
  where  oversight  by  an  electrical  administrator  is  not                 
  required (municipalities and electrical utilities were given                 
  as  examples).  Commissioner  Mahlen added that professional                 
  electrical engineers or mechanical  engineers would not have                 
  to take licensing tests because of their expertise.                          
  Commissioner  Mahlen stressed  the importance  of electrical                 
  and mechanical administrators  to the  health and safety  of                 
  the public.   The Dept.  of Labor has  only four  electrical                 
  inspectors  and two plumbing  inspectors statewide.   Alaska                 
  now has  616 electrical  and 605  mechanical administrators.                 
  These   individuals  are   equivalent   to  electrical   and                 
  mechanical engineers in installation expertise.  They ensure                 
  the safety of  all facilities  under their jurisdiction  and                 
  are necessary to  protect the  public, contractors, and  the                 
  labor force from unqualified and non-resident low bidders.                   
  The  proposed  transfer  from  the  Dept.  of  Commerce  and                 
  Economic  Development  will  provide  for  consolidation  of                 
  licensing,   regulation,   and   enforcement    within   the                 
  appropriate department.                                                      
  Senator  Kelly  MOVED that  SCS CSSSHB  249 (L&C)  pass from                 
  committee  with individual  recommendations.   No  objection                 
  having been raised, SCS CSSSHB 249 (L&C) was REPORTED OUT of                 
  committee with a $118.6 fiscal note from the Dept. of Labor,                 
  and  a  note  from  the   Dept.  of  Commerce  and  Economic                 
  Development  showing  a reduction  of  ($5.9).   All members                 
  signed the committee report with a "do pass" recommendation.                 
  HOUSE BILL NO. 252                                                           
       An  Act  amending the  Commercial  Fishing Loan  Act to                 
       authorize refinancing of existing loans made under that                 
  Co-chair  Pearce directed  that  HB 252  be  brought on  for                 
  discussion.     REPRESENTATIVE  MOSES   again  came   before                 
  committee.    He  explained  that  the proposed  bill  would                 
  provide  the  Dept.  of  Commerce  and Economic  Development                 
  authority to  refinance existing  commercial fishery  loans.                 
  Most of the 1,200 commercial  fishermen with state loans are                 
  paying 10.5% interest.   Regulations provide for  new, fixed                 
  rate loans at 2% above prime.  The current prime rate is 6%,                 
  and new  fishing loans  are at 8%.   There  is, however,  no                 
  mechanism for refinancing existing  loans to take  advantage                 
  of current low interest rates.                                               
  Over the past few years, commercial fishermen have faced low                 
  prices  and  unpredictable  fish  returns.    The  Dept.  of                 
  Commerce and  Economic Development approved  loan extensions                 
  for  nearly  half  of  the   existing  loans  following  the                 
  disastrous 1991 salmon  season.  This  year more than  3,000                 
  fishermen are reportedly in arrears  to the Internal Revenue                 
  Services for back  taxes.   Allowing fishermen to  refinance                 
  existing  loans and  reduce  monthly payments  will  provide                 
  assistance.  There is sufficient cash flow in  the revolving                 
  loan fund to accommodate the cost of refinancing.                            
  JERRY  McLUNE,  United  Fishermen  of  Alaska,  came  before                 
  committee voicing support for the bill.   He attested to the                 
  benefits of refinancing  an existing 10.5%  loan at 8%,  and                 
  noted that in not  allowing existing loan holders to  do so,                 
  the  state is  in effect  financing competitors  at a  lower                 
  As background information,  Mr. McLune spoke to  the success                 
  of  the loan  program, advising  that it  has  generated $40                 
  million to the general fund.   The requested relief is badly                 
  needed  during  present  difficult  economic  times  in  the                 
  fishing industry.                                                            
  Discussion followed between  Mr. McLune  and Co-chair  Frank                 
  regarding fixed and floating interest rates and the proposed                 
  term of refinanced loans.                                                    
  End, SFC-93, #73, Side 1                                                     
  Begin, SFC-93, #73, Side 2                                                   
  Mr. McLune attested to different  terms for different loans:                 
  permit loans, vessel loans, etc.                                             
  In response to additional questions from Co-chair Frank, Mr.                 
  McLune voiced his understanding that  in order to refinance,                 
  the borrower  would have  to be current  in his or  her loan                 
  KELLY SHARP, Loan Manager, Division of Investments, Dept. of                 
  Commerce and  Economic Development,  came before  committee.                 
  In response  to a question from Co-chair Frank regarding the                 
  impact  of  the proposed  bill  upon  the integrity  of  the                 
  commercial fishing revolving loan fund,  Mr. Sharp explained                 
  that  the impact would lower future  interest revenues by an                 
  estimated $1.6 million.  The department anticipates that all                 
  existing  loan  holders--approximately 1,250--would  want to                 
  take advantage of the interest break.                                        
  Co-chair Pearce pointed to the fiscal note from the Dept. of                 
  Commerce and Economic Development and referenced the request                 
  for four  new positions  (in addition  to the  existing four                 
  loan officers).  Mr. Sharp explained  that the new positions                 
  would be needed to  keep the loan processing time  at "about                 
  the same level."  A large influx of requests for refinancing                 
  would slow the  entire process.   In extending  refinancing,                 
  the department must  verify a number of  qualifications such                 
  as  residency.   Mr.  Sharp  noted  that the  House  cut the                 
  request in half to two positions for  a cost of $85.0.  Both                 
  Senator   Kelly  and  Co-chair   Frank  stressed   need  for                 
  minimizing  the   amount  of  paper  work   associated  with                 
  refinancing.   Senator Kelly cited  the streamlined  process                 
  used by AHFC in refinancing existing loans.                                  
  Discussion followed between  Co-chair Pearce  and Mr.  Sharp                 
  regarding current operation of the  loan program and payment                 
  schedules.  Mr.  Sharp advised that  most of the loans  call                 
  for an  annual payment in either October  or November, after                 
  the fishing season.                                                          
  Senator Sharp  inquired regarding  a  refinancing charge  to                 
  cover the  cost of the  paper work.   Mr. Sharp said  that a                 
  1/2%  fee  would be  charged.   It  is expected  to generate                 
  $228.0.  The average loan is   approximately $52.0.  Senator                 
  Kelly asked  if the refinancing  fee could be  deducted from                 
  the differential between the old and new  interest rate when                 
  making the  first refinanced  payment rather  than anted  up                 
  front.  Senator  Sharp  noted  that  AHFC  adds  refinancing                 
  charges  to  the principal  of  the  loan and  finances  the                 
  charges over the  term of the  loan.  Both Co-chairs  Pearce                 
  and Frank as well  as Senator Kelly voiced concern  that the                 
  department appears  to be  approaching refinancing  with the                 
  same detail as  first time loans.  They seriously questioned                 
  need for requested staff.                                                    
  DEAN  PADDOCK,  Bristol Bay  Driftnetters  Association, next                 
  came before committee in support of  the bill.  He predicted                 
  that the fishing  industry will need whatever  assistance it                 
  can  garner.    Interest rates  have  dropped  in all  other                 
  aspects of  society, and  fishermen should  also enjoy  that                 
  benefit.  He urged passage of the legislation.                               
  Senator Kelly  asked if  the prime  sponsor would  object to                 
  addition of the following language to the bill:                              
       Refinancing loan  origination charges of  1/2% are                      
       to be collected  when the first  refinance payment                      
       is due.                                                                 
  Representative  Moses  voiced  no  objection.    He  further                 
  commented  that he did not  believe all current loan holders                 
  would  refinance  due to  an  aversion  to paper  work.   He                 
  further  noted  that  the  program  has  lost  customers  to                 
  commercial banks  which have  had lower  interest rates  for                 
  some time.                                                                   
  Senator Kelly directed attention  to page 3, line 6,  of the                 
  bill and MOVED  to add  the above-cited language.   He  then                 
  voiced need for a letter of  intent urging the department to                 
  accomplish refinancing  utilizing as  little time  and paper                 
  work as possible.   No objection to either the  amendment or                 
  letter  of  intent  having been  raised,  the  amendment was                 
  ADOPTED.   Senator Kelly  advised  that he  would draft  the                 
  letter of intent.                                                            
  Discussion  followed regarding  the  fiscal note.   Co-chair                 
  Pearce reiterated  that House Finance allowed  two positions                 
  for a cost of $85.0.  She stressed that the positions are to                 
  be temporary rather  than permanent.   Co-chair Frank  MOVED                 
  that the position count and funding  be reduced to cover one                 
  position.    No  objection  having been  raised,  it  was so                 
  Further  discussion of  fixed  and  floating interest  rates                 
  followed among members.                                                      
  PAUL  FUHS,  Commissioner,  Dept. of  Commerce  and Economic                 
  Development, briefly came before committee.   He attested to                 
  difficult  times  within  the  salmon  industry.   For  many                 
  fishermen, refinancing  will determine whether  they survive                 
  or do not make it.  He  stressed that the instant bill alone                 
  will  not  cure  existing problems  and  spoke  to  need for                 
  legislation relating  to the ASMI  assessment as well.   The                 
  Commissioner said the state will lose 10 to 15% of the value                 
  of its salmon industry this year.   Unless Alaska is able to                 
  break  into  the   domestic  market,   no  amount  of   loan                 
  refinancing will save the industry.                                          
  Co-chair  Pearce  called   for  additional  comments  and/or                 
  questions.  None were forthcoming.  She then queried members                 
  concerning disposal of the  bill.  Senator Kelly MOVED  that                 
  SCSHB  252  (Finance)  pass  from  committee with  a  Senate                 
  Finance letter of intent and Senate Finance fiscal note.  No                 
  objection  having  been  raised,  SCSHB  252  (Finance)  was                 
  REPORTED  OUT of committee  with a Senate  Finance letter of                 
  intent and a $41.1 Senate Finance  fiscal note for the Dept.                 
  of Commerce and  Economic Development.   All members  signed                 
  the committee report with a "do pass" recommendation.                        
  [This latter portion  of the meeting was  teleconferenced to                 
  Seattle, Washington.]                                                        
  CS FOR HOUSE BILL NO. 264(FIN)                                               
       An Act levying and providing for the  collection of and                 
       disposition of  the  proceeds  of  a  fishery  resource                 
       landing tax; and providing for an effective date.                       
  Co-chair Pearce directed that  CSHB 264 (Fin) be  brought on                 
  for discussion and  noted a teleconference link  to Seattle,                 
  REPRESENTATIVE CARL MOSES  again came before committee.   He                 
  explained that the proposed bill  would establish a new  tax                 
  on fishery resources  caught and processed in  the exclusive                 
  economic zone--waters directly off of Alaska--but  which are                 
  then landed  within Alaska's jurisdiction.   These processed                 
  resources are currently not subject to  state tax.  The off-                 
  shore trawler fleet operating  within the exclusive economic                 
  zone has  been  extremely  profitable.    It  is  now  fully                 
  American  with most vessels based  in Washington State.  The                 
  fleet targets  groundfish with  incidental catches of  crab,                 
  halibut,  herring, and salmon.   Alaska provides significant                 
  benefits  and  services to  the  off-shore fleet  and incurs                 
  additional fishery  management and enforcement  costs.   The                 
  tax is one way to compensate the state for services.                         
  CSHB 264  (Fin) would impose  a modest  tax of  3.3% of  the                 
  value  of  the  processed  resource  landed  in  Alaska  for                 
  shipment to markets elsewhere.  The Alaska Seafood Marketing                 
  Institute would receive 0.3%  of the tax.  This  new landing                 
  tax would place the off-shore fleet on the same tax level as                 
  on-shore facilities.                                                         
  The House  Finance version of  the bill authorizes  a narrow                 
  tax  credit  limited to  the  tax  on the  value  of fishery                 
  resources harvested  under  a  community  development  quota                 
  program.      The  potential   value   of  this   credit  is                 
  approximately  $290.0.  That  is  a  small  portion  of  the                 
  projected $8.6 million to be generated by the tax.                           
  The  House  Finance Committee  Substitute  also  changes the                 
  definition of "value" used in computing the tax.  The change                 
  was  requested   by   the  fishing   industry   to   provide                 
  clarification  and  certainty   in  how  the  tax   will  be                 
  determined and applied.                                                      
  The original  legislation provided  a credit for  equivalent                 
  taxes paid in  other "states."  House  Finance extended that                 
  credit  to  taxes  equivalent  "in  nature"  paid  in  other                 
  "jurisdictions," including foreign countries.                                
  Representative Moses  directed attention  to  a fishery  tax                 
  study conducted by  the Dept.  of Revenue which  recommended                 
  that a landing  tax be  established.  He  stressed that  the                 
  current  tax  situation  for  shore-based  versus  off-shore                 
  processors is  unfair.   On-shore operations  are taxed  and                 
  contribute to the local economy through property taxes, etc.                 
  That tax is  equivalent to  what is now  being proposed  for                 
  off-shore processors.                                                        
  Discussion followed between Representative Moses and Senator                 
  Frank  regarding application of  the credit.  Representative                 
  Moses  said  that  community  development  quotas  represent                 
  approximately  7% of the  overall catch.   The quota program                 
  will sunset in two to three years.                                           
  Senator Sharp raised a question regarding what constitutes a                 
  qualified   non-profit.       MOLLY   McCAMMON,   aide    to                 
  Representative  Moses,   explained  that   the  credit   was                 
  requested by CDQ groups.   These groups now receive benefits                 
  from the Bering Sea Fishery Development Foundation.  Funding                 
  would likely flow to that foundation but rather than specify                 
  a particular entity  in statutes, CDQ  representatives asked                 
  that  the  bill  simply  cite  a  "non-profit  corporation."                 
  Moneys could then flow to  other local non-profits and those                 
  associated with regional Native corporations.   Moneys could                 
  only   be  used   for  training,   development  of   fishery                 
  infrastructure, etc.                                                         
  End, SFC-93, #73, Side 2                                                     
  Begin, SFC-93, #75, Side 1                                                   
  CARL  MEYER,  Chief  of  Appeals,  Income and  Excise  Audit                 
  Division,  Dept.  of  Revenue,   came  before  committee  in                 
  response to questions regarding calculation of the tax and a                 
  definition of non-profit  corporation.   He then provided  a                 
  verbal sectional analysis  of the  House Finance version  of                 
  the bill.   He assured that the  legislation was constructed                 
  to avoid situations where fishery resources would be taxable                 
  under both business tax and landing tax provisions.  The tax                 
  only  applies to fishery resources that are "first landed in                 
  this  state."    Filing  and   tax  payment  provisions  are                 
  essentially the same as for the business tax.                                
  Directing attention to credit provisions at page 2, line  7,                 
  Mr. Meyer  explained that  credit for  "taxes equivalent  in                 
  nature"  paid in  some other  jurisdiction apply  only to  a                 
  similar processing tax.  The credit  would not include sales                 
  tax  or  import  duty  levied  by  other  states   or  other                 
  countries.  In practice, there  should be little application                 
  of  the   credit.     It  relates   to  specific   purposes,                 
  scholarships,   training,   capital   for  construction   of                 
  infrastructure,   etc.     All  contributions   and  related                 
  activities must be within Alaska.                                            
  Application for the  credit would  be made to  the Dept.  of                 
  Revenue.  The department, in consultation  with the Dept. of                 
  Community and  Regional Affairs,  will make a  determination                 
  within 60 days.   The credit may be revoked at any time.  It                 
  may also be denied if the taxpayer is found to be in arrears                 
  in other taxes under Title 43.                                               
  Mr. Meyer  noted that 0.3%  of the  tax would  flow to  ASMI                 
  while the  remaining 3% would  be deposited into  a separate                 
  account in  the general  fund.   The balance  of the  latter                 
  account   may  be  appropriated   to  revenue   sharing  and                 
  distributed  per provisions set forth at  pages 3 through 5.                 
  Tax  credits  would  be  deducted  from amounts  flowing  to                 
  Pointing to  definitions set  forth on  pages 5  and 6,  Mr.                 
  Meyer noted that  "fishery resource" is defined  in business                 
  tax provisions.  The  definition of "landing" as the  act of                 
  "unloading or transferring a fishery resource" is new.                       
  Discussion  followed between  Senator Rieger  and Mr.  Meyer                 
  concerning revenue sharing  percentages set forth on  page 4                 
  of  the  bill.  Senator  Rieger  directed attention  to  the                 
  position paper  from the  department and  noted the  general                 
  fund revenue estimate of $4.3 million.   A like amount would                 
  be shared with  municipalities.  Mr.  Meyer concurred.   The                 
  department  projects total  collection  of approximately  $9                 
  Discussion  followed  between Senator  Kelly  and  Mr. Meyer                 
  regarding how the 3.3 tax percentage rate was selected.  Mr.                 
  Meyers noted that on-shore operations presently pay 3% while                 
  floating processors pay 5%.  Members of the American Factory                 
  Trawlers Association indicated that if a landing  tax was to                 
  be applied,  it should  be  fair.   The Association  further                 
  indicated that  if the  rate was  the same  as that  charged                 
  shore-based processors, and if the  value was the same value                 
  paid by  shore-based processors,  the association would  not                 
  oppose the legislation as being unfair.  The 3% rate evolved                 
  as  a means of  accommodating the industry.   In considering                 
  constitutional   aspects,   the  department   came   to  the                 
  conclusion that the 3 rate would be fair.  The 0.3% was then                 
  added for Alaska Seafood Marketing.                                          
  Senator Sharp voiced his understanding  that the state would                 
  retain 50% of tax revenues.  Mr. Meyer concurred.                            
  JOE BLUM,  American Factory Trawlers  Association, next came                 
  before committee, accompanied  by SUSAN  BURKE of Gross  and                 
  Burke.  Mr. Blum explained that the association is comprised                 
  of 18 member companies operating  42 catcher, processor, and                 
  mother ships that  fish in the 3 to  200-mile zone along the                 
  west  coast, the  Gulf of Alaska,  and the Bering  Sea.  Mr.                 
  Blum  voiced  opposition  to CSHB  264  (Fin)  based  on the                 
  constitutional issue of  whether or  not a state  can tax  a                 
  product that does not  enter state jurisdiction until  it is                 
  in  finished form  and is merely passing through  to market.                 
  He  acknowledged meetings with the Dept. of Revenue at which                 
  the    association    stressed   need    to    address   the                 
  constitutionality of the tax.                                                
  Another area of concern relates to whether or not the tax is                 
  fair. The association asked  that members not be taxed  more                 
  than the shore-side sector,  and that the tax be  based upon                 
  the  demand  for   services  members  make  on   the  taxing                 
  authority.  Factory Trawlers do not demand the same types of                 
  services, in the same amount, for the same period of time as                 
  do  shore-side  or  floating processors.    Trawlers  make a                 
  different type of demand over a shorter period of time.  The                 
  tax should be based upon that rather than the numerical rate                 
  of 3.3%.                                                                     
  Senator Kerttula asked if factory trawlers employed Alaskans                 
  or if a  majority of the work  force was from out  of state.                 
  Mr.  Blum responded,  "We  do not  have  a preponderance  of                 
  Alaskans .  . . on the vessels, but  we have a fair number."                 
  Alaska residency ranges from 800 to 1,000.  Senator Kerttula                 
  noted  that those  workers generate  tax needs  in terms  of                 
  schools for their children and other services.                               
  Mr. Blum next pointed to the Bering Sea Commercial Fisheries                 
  Development Foundation.   The  foundation has  a nine-member                 
  board  of  directors, six  of whom  are Alaskans.   It  is a                 
  voluntary, non-profit  foundation.    The  American  Factory                 
  Trawler Association  assesses itself  $0.75 per  ton on  all                 
  fish caught in the Bering Sea,  Aleutian Island, and Gulf of                 
  Alaska.  That money is used for fishery development projects                 
  in Western Alaska.   The  cornerstone of the  effort is  the                 
  training  program  through the  Seward  vocational facility.                 
  Western Alaskans  are selected for training for work in fish                 
  processing.   The program  has been  in existence  since the                 
  fall  of  1991 and  has trained  more than  150 individuals.                 
  Those  individuals have  generated  in excess  of  $3 to  $4                 
  million in cash  wages in  Western Alaska.   Mr. Blum  asked                 
  that a tax credit be given to any entity contributing to the                 
  foundation.   He observed that the proposed CDQ credit is 7%                 
  of "one part of the  resource."  At $2,000 per  trainee, the                 
  $290.0 CDQ  credit will  not  train as  many individuals  as                 
  could be trained if the credit base was larger.                              
  In  response  to a  question  from Senator  Kelly,  Mr. Blum                 
  advised that  the association has  contributed approximately                 
  $1 million to the foundation since 1991.  He further advised                 
  that when the  state and federal  governments agreed on  the                 
  CDQ program, the foundation provided training grants of $500                 
  per community for the 50 communities under the CDQ umbrella.                 
  If  a tax  is imposed  upon the  trawlers,  it will  make it                 
  difficult to both pay the tax  and continue to contribute to                 
  the foundation.                                                              
  Mr. Blum explained  that the association hoped  the attorney                 
  general or House or Senate Judiciary Committees would review                 
  the bill.  Failing those  occurrences, the association asked                 
  that Gross and Burke review both  pro and con aspects of the                 
  legislation.   Co-chair Pearce  noted the  presence of  both                 
  Judiciary  and  Resources committee  chairmen  as well  as a                 
  representative of  the Dept. of  Law.  The  Co-chair further                 
  advised  of  indication from  the  attorney general  that he                 
  would  provide  additional  information  on the  legislation                 
  tomorrow morning.                                                            
  SUSAN  BURKE, Gross and Burke,  emphasized that her firm had                 
  taken a "quick  look at the bill."  It did not conducted in-                 
  depth review.                                                                
  End, SFC-93, #75, Side 1                                                     
  Begin, SFC-93, #75, Side 2                                                   
  She  then highlighted concern relating to  the fact that the                 
  proposed   tax   implicates  two   sections   of  the   U.S.                 
  Constitution:  one  relating to interstate commerce  and the                 
  other  to  the foreign  commerce  clause.   States  are  not                 
  allowed to impose  taxes on activities  that form a part  of                 
  interstate  commerce.  If a state does so, it must meet four                 
  United States Supreme Court tests:                                           
            1.    There  must   be  sufficient  nexus--minimum                 
  contacts with  the state.                                                    
            2.   The   tax    cannot   discriminate    against                 
  interstate     commercial  activities  in  terms  of  giving                 
                 advantage to similar activities  conducted by                 
                 local taxpayers.                                              
            3.   The tax must  be fairly  related to  services                 
  the  taxing jurisdiction is providing to the taxpayer.                       
            4.   The tax must be fairly apportioned.                           
  Ms. Burke  said that she  focused primarily upon  the second                 
  test, dealing  with discrimination,  because  it raises  the                 
  most serious questions.                                                      
  Co-chair Pearce announced need to briefly recess the meeting                 
  to confer with House Finance co-chairs.                                      
                       RECESS - 6:05 P.M.                                      
                      RECONVENE - 6:25 P.M.                                    
  Upon reconvening the meeting, Co-chair Pearce requested that                 
  Ms. Burke  continue with her presentation.   Ms. Burke noted                 
  that  the  proposed  bill  applies  only to  fish  resources                 
  "brought  into  Alaska."   That  means  that it  applies  to                 
  interstate  and  perhaps  foreign  commerce  as  opposed  to                 
  domestic  activities.     It   thus  discriminates   against                 
  interstate  commerce.  Courts  will traditionally allow this                 
  type of tax  on interstate commerce  only if they  determine                 
  that  it  is  a  proper  "compensatory"  tax--an  effort  to                 
  equalize the tax  burden between people performing  the same                 
  activities in the state.  Ms. Burke cited, as  an example, a                 
  sales and a use tax that  essentially tax the same activity.                 
  She then questioned whether a  court would view the proposed                 
  landing tax as  compensatory to  the existing business  tax.                 
  The  business tax is levied upon  the business of processing                 
  fish.  The landing tax is similar to a property tax.                         
  If  the  question of  whether the  landing  tax is  a proper                 
  compensating tax is bypassed, a  further question of whether                 
  burdens on interstate commerce and  local commerce are equal                 
  is raised.  A state cannot  place more burdens on interstate                 
  commerce than it places on local  commerce.  The question is                 
  further  complicated by  the  tax differential  between off-                 
  shore  and  domestic  processors.    Ms. Burke  also  raised                 
  questions concerning the  0.3% of the  tax to flow to  ASMI.                 
  She further noted  a difference in tax burden between shore-                 
  based  and out-of-state  processors  in  terms  of  credits.                 
  Credits  allowed under AS  43.75 are  not allowed  under the                 
  proposed landing tax.  That is another serious issue.                        
  Ms. Burke advised of her understanding that a portion of the                 
  fishery resource subject  to the proposed  tax belongs to  a                 
  foreign purchaser  by  the  time  it "hits  Alaska."    That                 
  squarely  raises  foreign commerce  issues.   She  cited the                 
  Japan Lines case from California as an example of an attempt                 
  to impose a tax upon  empty shipyard containers belonging to                 
  foreign shipping  companies and used  exclusively in foreign                 
  commerce.  The Supreme Court held that the  tax could not be                 
  levied.   That  decision was  based on potential  for double                 
  taxation  and  whether  the  state   tax  inhibited  federal                 
  government  ability  to "speak  with  one voice  rather than                 
  fifty voices" when dealing with foreign countries.                           
  Ms.  Burke acknowledged that most  of the problems appear to                 
  be  fixable,  given sufficient  analysis  and thought.   She                 
  stressed the importance  of stability  in state tax  policy.                 
  She  further  remarked  on the  expectations  that  would be                 
  raised should  the proposed  bill pass  the legislature  and                 
  subsequently be found to be unconstitutional.                                
  Pointing  to  language  within  the  bill, Ms.  Burke  noted                 
  drafting problems,  advising that  the legislation  does not                 
  require that the fish be processed.  While the intent behind                 
  the  tax  is to  capture  revenues from  resources processed                 
  outside  the state, the  bill does not  limit application to                 
  processed resources.  She further noted exclusions within AS                 
  43.75  and noted  that  it appears  that  the proposed  bill                 
  imposes  a tax  on what  the legislature  earlier sought  to                 
  exclude  from  taxation.   Ms. Burke  stressed need,  from a                 
  taxing policy  standpoint, for  review over  the interim  in                 
  order  to  develop  legislation  more  likely to  survive  a                 
  constitutional challenge.                                                    
  HARVEY SAMUELSON  from Dillingham, Alaska, next  came before                 
  committee to speak on behalf of  the Bristol Bay CDQ program                 
  and  as   a  founding  father  of  the  Bering  Sea  Fishery                 
  Development Foundation.  He observed that the foundation has                 
  done  more  good  "than any  social  program  that ever  hit                 
  Western Alaska."   It has  provided jobs, self  respect, and                 
  something for young people to look forward to.  Both BIA and                 
  the  state  have failed  in  these efforts.    Mr. Samuelson                 
  stressed need for  the foundation  to derive greater  credit                 
  from landing fees.  Much remains  to be done, and it  cannot                 
  be accomplished overnight.  Foundation training has provided                 
  300 to 350 jobs.  After the first of the year, when 30 to 60                 
  jobs were  sought for  Western Alaska  residents, processors                 
  out of Dutch  Harbor brought in  over 1,000 cannery  workers                 
  from "the states" and did not hire from Interior Alaska.                     
  In  response  to  a  question  from  Senator  Kerttula,  Mr.                 
  Samuelson said that the training  programs cover "the entire                 
  Bering Sea coast up to Nome" as well as St. Lawrence Island.                 
  Senator  Jacko noted  that factory  trawlers could  continue                 
  current contributions with or without  the legislation.  Mr.                 
  Samuelson  stressed  that   "Lots  of  them  are   on  their                 
  deathbeds."   Many factory trawlers will not be in existence                 
  much longer.   There  will then  be no money  with which  to                 
  operate the foundation.   Senator  Jacko pointed to  credits                 
  for CDQ program training modeled  on the foundation program.                 
  Mr. Samuelson  countered that  the amount  involved is  less                 
  than  $300.0  for  "six outfits."    Further,  the  state is                 
  loading  down  CDQ  programs  with   scholarship  and  other                 
  requirements in the first year of operation.  He argued that                 
  the "state is  trying to make us spend all  our money before                 
  we get it."                                                                  
  PHIL  CHITWOOD,   Tyson   Seafoods,   next   testified   via                 
  teleconference  from  Seattle.    He  explained  that  Tyson                 
  entered  the  seafood industry  through  purchase  of Arctic                 
  Alaska Fisheries Corporation.  The company intends to expand                 
  its operation through expansion of existing  and development                 
  of new  facilities in  Alaska.   The extent  to which  these                 
  plans  proceed will  depend  upon the  economic  environment                 
  provided by the  state.   The proposed bill  would impose  a                 
  3.3% tax based  on the  raw fish  value of  fish caught  and                 
  processed outside  of  state waters  and transhipped  inside                 
  state waters.  It is estimated that the tax will cost  Tyson                 
  "upwards of $1.5 million next year."  Tyson operates a fleet                 
  of 31 vessels which  catch and process ground and  shellfish                 
  at sea.  Because of declining  prices in world fish markets,                 
  nearly half of  the vessels are  presently docked.   Margins                 
  are insufficient  to operate  those vessels.   Enactment  of                 
  CSHB 264 (Fin) will  significantly add to the cost  of doing                 
  business  in  Alaska and  will  result  in  the  docking  of                 
  additional vessels.   Tyson cannot expand its  investment in                 
  Alaska while being forced to tie up additional ships.  There                 
  could not be  a worse  time to burden  the offshore  fishing                 
  industry  with  additional expenses.    Few, if  any, Alaska                 
  groundfish participants had profitable operations last year.                 
  The outlook for the next few years is no brighter.                           
  Mr. Chitwood urged that CSHB 264 (Fin) be held in committee.                 
  He termed it seriously flawed, if  not illegal.  If enacted,                 
  Tyson  would  be  forced  to  put  additional  dollars  into                 
  litigation rather than its Alaska operations.                                
  Mr.  Chitwood  pointed to  the  self-assessed $0.75  per ton                 
  contribution  by  trawlers  to the  above-mentioned  fishery                 
  development foundation.  He stressed that the foundation has                 
  proven to be extremely successful in providing employment to                 
  Western Alaska residents.  The proposed bill contains no tax                 
  credit  for  contributions Tyson  makes  to  the foundation.                 
  Those contributions will stop if a credit is not included. A                 
  credit should  also  be allowed  for  fees paid  on  product                 
  shipped to foreign countries.   That omission warrants legal                 
  CSHB  264  (Fin)  would  impose  the same  tax  upon  at-sea                 
  catcher/processors  as  on   shore-side  catcher/processors.                 
  That is unfair.  At-sea processors provide their own support                 
  services  while shore-side operations  depend upon the state                 
  and local communities to do so.  Each sector of the industry                 
  should  be taxed in  proportion to its  receipt of services.                 
  The  proposed tax  on  off-shore  operations will  result in                 
  curtailment of  operations,  loss  of  jobs,  and  decreased                 
  spending in coastal communities.  Passage of the legislation                 
  will not have  a positive impact.   Mr. Chitwood urged  that                 
  the bill be held in committee for further analysis to ensure                 
  that it is fair and acceptable to the industry.                              
  In response to a question  from Co-chair Frank, Mr. Chitwood                 
  advised that Tyson  processes approximately 200,000  tons of                 
  groundfish  and  100,000  pounds  of  crab  per  year.    He                 
  subsequently voiced Tyson's intent to  move from a partially                 
  integrated  business to a  fully integrated seafood business                 
  whereby the product processed in  Alaska "goes on somebody's                 
  plate" rather than to a secondary processor.                                 
  THORN SMITH,  North Pacific Longline Association, next spoke                 
  via teleconference from Seattle.                                             
  [The   following  is   a   transcription  of   Mr.   Smith's                 
  teleconference testimony.]                                                   
       Thank you, Madam  Chair.   For the record,  my name  is                 
       Thorn Smith.   I represent  the North Pacific  Longline                 
       Association.    Our   association  represents   freezer                 
       longliners which catch  and process  ground fish in  an                 
       exclusive economic zone  in the Gulf of  Alaska and the                 
       Bering Sea.  Our vessels primarily  fish for cod in the                 
       Bering Sea/Aleutian Islands area.   I want to emphasize                 
       that  these  cod are  caught, processed,  packaged, and                 
       traded  in the  exclusive  economic  zone,  outside  of                 
       Alaska.   In many  cases it's  done quite  a number  of                 
       miles outside of Alaska.  The finished product  is off-                 
       loaded at the transports within the territorial sea and                 
       put  directly  into  foreign commerce  for  markets  in                 
       Europe and  the Far  East.   Often these  transfers are                 
       made at anchor and do not involve the use of a dock.                    
       In  the  course of  our  operations, we  purchase food,                 
       fuel,  and services  from Alaska  businesses, making  a                 
       substantial contribution  to Alaska's economy.   We use                 
       state facilities on a pay-as-you-go basis.  A number of                 
       these  freezer  longliners are  owned  and operated  by                 
       Alaskans and Alaska  fishery pioneers.  I'm  sure names                 
       like John Winther, Jim Beason  (sp?), and Beaver Nelson                 
       are familiar to you.                                                    
       I'm advised  that Senator Ted  Stevens was particularly                 
       enthusiastic  when  he  was informed  that  a  group of                 
       Kodiak fishermen  were joining  together  to build  the                 
       ALASKA LEADER, which is a substantial freezer longliner                 
       operating out of  Kodiak.  The Senator  recognized that                 
       the  relatively  simple  technology  that  we use,  the                 
       [indiscernible]   technology   on  these   vessels,  is                 
       accessible to ordinary Alaskans of ordinary means,  and                 
       that it provides  a very good  opportunity for them  to                 
       get  into  the  [indiscernible]   off-shore  processing                 
       Freezer longliners are relative newcomers to the ground                 
       fish  fishery.  They  are able to  harvest ground fish,                 
       particularly  cod,  in  a conservation-oriented  manner                 
       with minimal bycatch mortality and  discard.  Only when                 
       federal authorities, not  too long ago,  eliminated the                 
       Japanese  downline  and longline  fisheries  off Alaska                 
       were American fishermen able to  gain access to premium                 
       markets.    Our vessels  are  recently built.   They're                 
       heavily   capitalized,    and   they're    particularly                 
       vulnerable to market fluctuations.                                      
       A  flood  of  cheap  Russian   white  fish  product  in                 
       international  markets  has lowered  prices drastically                 
       over the  last  year and  has created  a real  economic                 
       crisis in our industry.  The landing tax proposed  here                 
       could drive many of us out of business.  Unfortunately,                 
       this is  not an exaggeration.   The timing  couldn't be                 
       worse.  We  support proposed amendments by  the Fishing                 
       Company of Alaska to make it clear that the landing tax                 
       would not apply  to product processed outside  of state                 
       jurisdiction  and  transferred   directly  to   foreign                 
       commerce,  and also  an  amendment which  would prevent                 
       double  taxation.  We,  of course,  have to  pay export                 
       duties when we sell products to foreign markets.                        
       In  our  view,  the constitutionality  of  the proposed                 
       landing tax has  not been  demonstrated.   It has  been                 
       shown that  there is not  a good  nexus linking  at-sea                 
       processing activity with the state to justify taxation.                 
       The  finished product  is merely  transferred from  one                 
       vessel to another in state waters.  No processing takes                 
       place [indiscernible] foreign  ports.  This may  or may                 
       not involve the  use of  a dock.   There may  not be  a                 
       change  of ownership  in  the product  at  the time  of                 
       Any use of a major state facility, as I said, is on a                   
       pay-as-you-go basis.   And  there has  been no  showing                 
       that the proposed  tax bears a fair relationship to the                 
       services provided by the state.   We feel that it would                 
       be a mistake to move this legislation forward without a                 
       thorough legal analysis  of these issues and  without a                 
       very careful consideration, by the legislature, of  its                 
       impact on  Alaskans and  non-Alaskan owners  of freezer                 
       Thank you for  your attention.  I'd be  happy to try to                 
       respond to any questions.                                               
  SEN. PEARCE - Thank you very much, Mr. Smith.  Are there any                 
  SEN. KERTTULA - I have one.                                                  
  SEN. PEARCE - Senator Kerttula.                                              
  SEN. KERTTULA -  If you unload  the fishery products in  the                 
  state of                                                                     
       Washington,  do  you  pay  any  tax  to  the  state  of                 
  MR.  SMITH - Phil  is shaking his  head, no.   Actually, our                 
       don't work off the state of  Washington, and so I can't                 
       respond, Senator.                                                       
  SEN. KERTTULA - Okay.  Others may well, though, right?                       
  MR. SMITH - I'm sorry, I can't tell you.  I don't know.                      
  End, SFC-93, #75, Side 2                                                     
  Begin SFC-93, #76, Side 1                                                    
  FORMER SENATOR MIKE SZYMANSKI, next came before committee on                 
  behalf of  Fishing Company  of Alaska.   He  noted that  the                 
  community of Dutch Harbor would  be the primary recipient of                 
  the proposed tax.                                                            
  Mr.  Szymanski  provided  a  brief  history of  the  Fishing                 
  Company of Alaska.  He explained that the off-shore industry                 
  has  predominantly  been   Americanized  while   shore-based                 
  operations  are largely  owned  by Japan.   The  company has                 
  three  long liners  and seven  trawlers.   The  proposed tax                 
  would not only  impact trawlers but long  liners, crabbers--                 
  anyone involved  in the process  of bringing catch  from the                 
  economic zone into the three-mile zone for  offloading.  All                 
  of the product  is caught far off the coast  and is produced                 
  exclusively for Korean  and Japanese  markets.  The  company                 
  employs 300 to  400 people on  its vessels and in  corporate                 
  headquarters  in  Seward,   Anchorage,  Dutch  Harbor,   and                 
  Seattle.   Vessels offload to tramper  ships bound for Korea                 
  and Japan.   Many times offloading occurs in  isolated bays,                 
  and the trampers do not enter Alaskan ports.  The product is                 
  pre-sold  before it  enters  the Alaskan  zone.   For  these                 
  reasons,  the bill poses  serious problems  in terms  of the                 
  foreign commerce clause of the U.S. Constitution.                            
  The  company  is  anticipating significant  losses  for  the                 
  current year due  to a market drop  of almost 50% caused  by                 
  foreign competition.   If the  proposed tax  is imposed,  it                 
  would  put the company at great disadvantage in dealing with                 
  competitors, particularly Japanese and  Korean fishermen who                 
  have the  ability to fish  former Soviet Union  waters, take                 
  the  product  to  market, and  sell  it  below  the cost  of                 
  production in Alaska.                                                        
  Mr. Szymanski noted company contributions  to the economy of                 
  Dutch  Harbor  by  payments   for  garbage,  water,   sewer,                 
  electricity,  security,  medical,  transportation, food  and                 
  other  direct services of offloading.  The company also pays                 
  payroll  and business  taxes,  docking, port,  and  piloting                 
  fees, etc.  Operating costs  are significant.  Unlike shore-                 
  based  processors,   the   company   does   not   have   the                 
  infrastructure  support  from  local  communities.   Vessels                 
  homeported out of Seward  spend more time in that  community                 
  than at Dutch Harbor.                                                        
  Directing attention to a February 22, 1993, memorandum (copy                 
  on file  in the  HB 264  bill file)  from Legislative  Legal                 
  Services, Mr.  Szymanski pointed to potential problems under                 
  the United States  Constitution's commerce clause.   He then                 
  read substantial portions of the  memo.  Mr. Szymanski  next                 
  cited constitutional problems highlighted in  a May 2, 1993,                 
  memorandum (copy on  file) from  Patton, Boggs &  Blow.   He                 
  stressed that  once the  issue becomes  a matter  of foreign                 
  commerce, the state is prohibited  from taxing or regulating                 
  the  effort.    A  corrective   amendment  was  offered  and                 
  partially adopted when the bill was  in the House.  However,                 
  the section relating  to "Credit for Other Taxes Paid," page                 
  2, remains  flawed.  Mr.  Szymanski directed attention  to a                 
  proposed  amendment to  correct problems  by excluding  "the                 
  whole foreign commerce practice."                                            
  Mr. Szymanski next spoke to  problems resulting from lack of                 
  nexus when  attempting to  apply the  tax to  a vessel  that                 
  entered state waters only once and transferred its  catch to                 
  a foreign tramper.  In that situation, the tax does not bear                 
  a relationship  to  services  provided by  the  state  or  a                 
  coastal community.                                                           
  Mr.  Szymanski  referenced  a  "port  incentive  development                 
  amendment" and  explained that it would allow other ports an                 
  opportunity to provide "some portion of a tax-free zone."                    
  Discussion of expansion of CDQ programs followed between Mr.                 
  Szymanski and Senator Frank.                                                 
  In continued  discussion, Mr.  Szymanski questioned  whether                 
  communities  where offloading  occurs  should reap  windfall                 
  rewards rather than  the state  general fund or  communities                 
  (Seward, Petersburg, etc.) where the vessels winter over.                    
  Mr. Szymanski next  spoke to the issue  of a fair tax  rate,                 
  terming the  3.3% tax  unjustifiable in  relation to  direct                 
  services.   If this  taxation policy  is found  to be  just,                 
  could  it  be extended  to  OCS oil  and  gas, international                 
  airport products, or similar products  upon first landing in                 
  the state.   A  major challenge  to this  issue has  already                 
  occurred  in  Louisiana  where  courts  failed to  uphold  a                 
  proposed tax.                                                                
  Discussion  followed  between   Senator  Kerttula  and   Mr.                 
  Szymanski  regarding industry support  to schools  and other                 
  state and  community services.   Speaking  to the  off-shore                 
  industry obligation, Mr. Szymanski suggested  a 1% tax would                 
  cover impact.  Senator Kerttula asked if a 1% tax would make                 
  the legislation  constitutional.   Mr.  Szymanski said  that                 
  while he could not speak in terms of nexus problems, he felt                 
  that the  1% tax would  be more  equitable in terms  of off-                 
  shore impact.                                                                
  Discussion followed between Co-chair Frank and Mr. Szymanski                 
  regarding  competition from  Russian resources  harvested by                 
  Korean and  Japanese fishermen.  Further discussion followed                 
  regarding federal export taxes and port and harbor fees.                     
  Senator  Jacko  asked  if  shore-based processors  presently                 
  paying a  3% tax  compete in  the same  market as  off-shore                 
  operations.   Mr. Szymanski acknowledged  that they do.   He                 
  noted, however,  that on-shore  processors receive  services                 
  such  as  electricity,  water, sewer,  garbage  pickup, etc.                 
  Off-shore   operations   bear   the  expense   of   on-board                 
  infrastructure  to provide  these services  at sea.    It is                 
  sometimes  less  costly  and more  efficient  to  operate on                 
  MARK ERNEST, City  Manager, Unalaska, and STEPHANIE  MATSON,                 
  City Council Member, Unalaska,  next came before  committee.                 
  Mr.  Ernest echoed statements  by Representative  Moses when                 
  speaking to  impact sustained by communities  from off-shore                 
  processing operations.                                                       
  In  referring  to  immediately  preceding  comments  by  Mr.                 
  Szymanski,  Mr.  Ernest explained  that  in addition  to the                 
  present 3% tax,  on-shore processors also pay  real property                 
  taxes and a 2% local fish  use tax.  The off-shore fleet  is                 
  not subject to those  taxes.  An estimated 70,000  to 80,000                 
  people travel through  the Unalaska Airport annually.   Crew                 
  changes generally occur  in port,  and there is  substantial                 
  impact  on  the  health  clinic,  roads, and  education  and                 
  recreation  facilities.   Mr.  Ernest  urged passage  of the                 
  proposed bill.                                                               
  Co-chair Frank asked how the state  might be able to protect                 
  against law  suits challenging the  constitutionality of the                 
  legislation.   Mr. Ernest  suggested that  tax receipts  and                 
  subsequent payments  to  municipalities  could  be  held  in                 
  escrow pending a ruling on the challenge.                                    
  [Co-chair  Pearce  noted termination  of  the teleconference                 
  link at this time.]                                                          
  Discussion  followed between  Ms. Matson  and Senator  Jacko                 
  concerning a Fishing  Company of Alaska contribution  to the                 
  Unalaska health clinic.  Referencing earlier comments by Mr.                 
  Szymanski regarding the small  amount of time spent  in port                 
  by  off-shore  processors,  Ms.  Matson  noted  that  it  is                 
  difficult to  deputize sufficient  police officers  for duty                 
  when crews show  up on an  unknown schedule.  The  community                 
  must maintain  full capacity  to respond  when needed.   The                 
  city thus bases staffing on historical need.  She reiterated                 
  that  approximately  72,000  people  pass  through  the  air                 
  terminal each year.  The community has a service population,                 
  besides shore-based processors,  of 15,000 to 18,000.   That                 
  can  be  verified  by the  number  of  patients who  utilize                 
  services of  the health clinic.   Ms.  Matson further  noted                 
  that members  of the  American Factory  Trawlers Association                 
  fish Russian waters and return the product to Unalaska.                      
  Discussion followed between Ms.  Matson and Senator Kerttula                 
  regarding competition among coastline communities that offer                 
  port facilities to fishing operations.                                       
  RICK  LAUBER,  representing the  Pacific  Seafood Processors                 
  Association, next  came before  committee.   He attested  to                 
  concern  in  the  early 1970s  that  foreign  fishermen were                 
  taking  Alaskan  resources,  and  the  state was  not  being                 
  compensated for  that taking.   The 200-mile limit  was thus                 
  imposed  to prohibit that  intervention.   Alaska now  has a                 
  "distant  water fleet"  fishing off its  coast.   That fleet                 
  pays no taxes to the state.  Mr. Lauber acknowledged that  a                 
  small number of fishermen and  small processors that deliver                 
  to  larger,  floating  operations  are  fighting  to  remain                 
  profitable.    Large,  off-shore operation  have  failed  to                 
  mention  that they spend millions attempting to "grab all of                 
  the resource so that Alaskans would  not have a single pound                 
  of it."                                                                      
  End, SFC-93, #76, Side 1                                                     
  Begin, SFC-93, #76, Side 2                                                   
  Mr. Lauber noted that all communities "around the rim of the                 
  Bering  Sea,"  including  those   fifty  miles  inland,  are                 
  involved in  the CDQ  program, with the  exception of  Dutch                 
  Harbor/Unalaska.    The  purpose  of  CDQs is  to  encourage                 
  communities to become involved in the fishing industry.  One                 
  cannot  talk  about an  amendment  that would  grant factory                 
  trawlers  an  exemption  or tax  credit  without  taking CDQ                 
  programs and the magnitude of the quotas into consideration.                 
  Factory  trawlers have  contributed approximately  $600.0 to                 
  the foundation.   Community Development Quotas  for villages                 
  along the Bering Sea are worth between $20 to  $25 million a                 
  year.  The purpose of CDQs is to do "what this foundation is                 
  attempting  to  do."    While  the  trawler  fleet  deserves                 
  recognition for its contributions, it does not deserve a tax                 
  Mr. Lauber advised that the proposed legislation should have                 
  been passed a long  time ago.  He stressed  that shore-based                 
  processors  actually  pay  5.3% because  they  pay municipal                 
  taxes  in  addition to  those  levied  by the  state.   That                 
  percentage does not  include real property and  other taxes.                 
  Mr. Lauber spoke to the  permanence of shore-based operation                 
  and noted that  off-shore trawlers are flexible  and able to                 
  move to alternative fishing grounds (Oregon, Russian waters,                 
  Australia, and New  Zealand).   Shore-based processors  have                 
  invested hundreds of millions of  dollars in facilities that                 
  cannot be  moved.   Off-shore competitors  should be  fairly                 
  taxes.  Mr. Lauber urged the legislature to impose a  tax on                 
  factory trawlers  commensurate with their  activities in the                 
  State of Alaska.                                                             
  Discussion followed between Mr. Lauber and  Senator Kerttula                 
  regarding ownership of on-shore processing operations.                       
  JEFF KOENINGS,  Director, Division  of Commercial  Fisheries                 
  Management and  Development, Dept.  of Fish  and Game,  next                 
  came  before  committee, voicing  support  for  the proposed                 
  landing tax.  He attested to the fact that off-shore factory                 
  trawlers harvest a  bycatch of  crab, halibut, herring,  and                 
  salmon  while  targeting  another  species.    This  bycatch                 
  consists  of   species  of  great   importance  to  Alaska's                 
  fishermen,  processors,   and  coastal  communities.     The                 
  incidental harvest  by  factory  trawlers  has  an  economic                 
  impact  on  Alaskans   by  removing  resources  they   would                 
  otherwise be harvesting and processing.                                      
  Mr. Koenings next spoke extensively to department management                 
  in exclusive economic zone fisheries.                                        
  DEAN PADDOCK,  Bristol Bay  Driftnetters Association,  again                 
  came before committee.   He voiced concern  regarding salmon                 
  bycatch and spoke to need for an incentive to induce factory                 
  trawlers to  reduce that bycatch.  He concluded his comments                 
  by referencing the proposed landing tax and saying, "If this                 
  is it, go to it."                                                            
  Co-chair  Pearce advised  of notification that  the Attorney                 
  General would provide a statement  of defensibility at 11:00                 
  a.m. tomorrow morning.   She  suggested that amendments  for                 
  the bill be offered at that time.                                            
  The meeting was adjourned at approximately 8:15 p.m.                         

Document Name Date/Time Subjects