Legislature(1993 - 1994)
05/04/1993 03:10 PM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE May 4, 1993 3:10 p.m. TAPES SFC-93, #72, Side 2 (075-end) SFC-93, #74, Side 1 (000-355) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 3:10 p.m. PRESENT In addition to Co-chairs Frank and Pearce, Senators Jacko, Kelly, Kerttula, Rieger, and Sharp were present. ALSO ATTENDING: Senator Salo, Representative Bill Moses, Bill Stoltze, staff for Representative Ed Willis; Charles Cole, Attorney General, Department of Law; Kim Elton, Executive Director, Alaska Seafood Marketing Institute; Representative Bill Hudson, sponsor of HB 275; Jerry McCune, President, United Fisherman of Alaska; Dean Paddock, Bristol Bay Driftnetters Assoc.; Mike Greany, Director, and Dave Tonkovich, Fiscal Analyst, Legislative Finance Division; and aides to committee members. SUMMARY INFORMATION CSHB 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. Attorney General Charles Cole spoke to CSHB 264(FIN). Discussion was had by Senators Rieger, Kelly, and Mr. Cole. Senator Kelly MOVED amendment 1. It FAILED on a vote of 4-3. CSHB 264(FIN) was REPORTED OUT of committee with a "do pass" and with a fiscal note for Dept. of Revenue for $94.0 and for the Dept. of Commerce & Economic Development for $860.0. Senators Kelly and Kerttula signed a "no recommendation." Co-chairs Pearce and Frank, Senators Rieger, Jacko, and Sharp signed "do pass." CSHB 275(FIN) am - An Act relating to the Alaska Seafood Marketing Institute and a salmon marketing tax; and providing for an effective date. Testimony was heard by Kim Elton, Alaska Seafood Marketing Institute; Representative Bill Hudson, sponsor of HB 275; Jerry McCune, President, United Fisherman of Alaska; Dean Paddock, Bristol Bay Driftnetters Assoc., and Senator Salo in support of CSHB 275(FIN) am. Amendment 1 and 3 were ADOPTED. Amendment 2 by Senator Jacko FAILED. SCSCSHB 275(FIN) was REPORTED OUT of committee with a "no recommendation" and with a fiscal note for Dept. of Commerce & Economic Development for $5,640.3 and the Dept. of Revenue for $109.7 and revenue of $5,750.0. Co-chairs Frank and Pearce signed "do pass." Senators Sharp, Rieger, and Kerttula signed "no recommendation." Senators Jacko and Kelly signed "do not pass." HJR 27 - Relating to an amendment to the Constitution of the United States prohibiting desecration of the Flag of the United States. Testimony was heard in support of HJR 27 by Bill Stoltze, staff for Representative Ed Willis. HJR 27 was REPORTED OUT of committee with a "do pass." Senators Sharp, Jacko, Kelly, Kerttula and Co-chair Frank signed "do pass." Senator Rieger and Co-chair Pearce signed "no recommendation." Bills scheduled but not heard: CSHB 82(FIN) - An Act relating to school construction grants and major maintenance grants to school districts; providing for school district participation in the cost of school construction and major maintenance; creating a major maintenance grant fund; creating an education facilities maintenance and construction fund; and providing for an effective date. CSHB 124(FIN) - An Act establishing capital project matching grant programs for municipalities and unincorporated communities; and providing for an effective date. CSHB 179(FIN) am - An Act relating to motor vehicles and mobile homes; and providing for an effective date. 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 DRUE PEARCE announced that CSHB 264(FIN) was before the committee. She invited Charles Cole, Attorney General, Department of Law, to speak to the bill. CHARLES COLE said that he had been reading advance sheets for the Supreme Court. He described one case that he hoped would enable the committee to evaluate the constitutionality of the tax as set forth in CSHB 264(FIN). The case was ITEL Containers International Corp. petitioner vs. Joe Huddleston, Commissioner of Revenue, State of Tennessee. He felt the case was interesting because it involved a tax imposed by the state of Tennessee on containers which were delivered by lessees or their agents in many states, including Tennessee. In the course of the Supreme Court's opinion it said that the state rejected the argument that the tax created a substantial risk of international multiple taxation because the taxes were imposed on a discreet transaction, the transferred possession of cargo containers within Tennessee. So it did not risk multiple taxation or impede federal regulation or foreign trade. In CSHB 264(FIN) the proposed tax is also upon a discreet transaction which takes place entirely in the state of Alaska, the first landing of fish products. This Alaska tax is similar to the tax in the aforementioned case. In further describing the case, he said the Supreme Court, in the course of its opinion, said the state tax satisfied complete domestic commerce law tests "when the tax is applied to an activity and when a substantial nexus within the taxing state is fairly apportioned, does not discriminate against interstate commerce and is fairly related to the services provided by the state." The Supreme Court had no trouble in its opinion finding this Tennessee tax satisfied those four tests. It said, therefore, that there was a substantial nexus, the tax was fairly apportioned, that it did not discriminate against interstate commerce, and was fairly related to the services provided by the state. The Court went on to say that the tax is a fair measure of the state's contact within the given commercial transaction in all four aspects. This complete auto-test confirmed both the state's legitimate interest in taxing the transaction and the absence of an attempt to interfere with the free flow of commerce be it foreign or domestic. The Court went on to discuss international aspects of the tax and had no problem with those. He said that based on this case in the United States Supreme Court dated February 1993, and the lines of authority cited in it, that the tax found in this bill, while not entirely free from the tax on domestic and foreign commerce clauses of the United States Constitution, in his view, withstood these tests. SENATOR STEVE RIEGER asked if there was a distinction made whether the tax is imposed on the landing or on the fish. Mr. Cole said that the tax is a landing tax not on the fish. It is an event with substantial nexus with the state of Alaska. SENATOR TIM KELLY MOVED amendment 1 (copy on file). Senator Kelly spoke in support of the amendment which gave a tax credit for those who have been funding the Bering Sea Foundation. SENATOR JACKO OBJECTED. Senator Jacko said that this amendment was not necessary for this piece of legislation and that he had drafted another bill that would address this issue. Co-chair Pearce called for a show of hands and the amendment FAILED to be adopted on a vote of 4 to 3. Senators Kelly, Pearce and Kerttula were in support of the amendment. Senators Frank, Rieger, Jacko, and Sharp were opposed. Senator Jacko MOVED for passage of CSHB 264(FIN) from committee with individual recommendations. No objections being heard, CSHB 264(FIN) was REPORTED OUT of committee with a "do pass," and with a fiscal note for the Department of Revenue for $94.0, and a fiscal note for the Department of Commerce & Economic Development for $860.0. Co-chair Frank, Senators Jacko, Rieger, and Sharp voted "do pass." Co-chair Pearce, Senators Kerttula and Kelly voted "no recommendation." CS FOR HOUSE BILL NO. 275(FIN) am: An Act relating to the Alaska Seafood Marketing Institute and a salmon marketing tax; and providing for an effective date. Co-chair Pearce invited Kim Elton, Executive Director, Alaska Seafood Marketing Institute, to join the committee at the table and speak to CSHB 275(FIN) am. KIM ELTON spoke to the sections of CSHB 275(FIN) am. Senator Kelly asked what changes had been made to the bill in the Senate version. Mr. Elton said that one of the changes provided for a separate salmon committee that would advise the whole board on the salmon marketing program. He also believed that a change had been made to the salmon enhancement tax legislation. Senator Kelly asked if a public member had been reinstated to the board. Mr. Elton answered affirmatively. Mr. Elton said that United Fisherman of Alaska (UFA) are interested in amending this bill to reestablish the salmon marketing subcommittee, and ASMI board had no objection to that amendment. REPRESENTATIVE BILL HUDSON, sponsor of HB 275, said that amendment 1 revised (copy on file) had been forwarded by UFA. He said that the concept was in the Senate version of the bill but had been removed when it was in the House. It would establish the salmon marketing committee with representation from around the coast to advise the ASMI board. It would also delete the provision that establishes the executive board which would still be up to the majority of the board members who will now consist of 12 fishermen and 12 processors. He said that he was in support of amendment 1 revised. SENATOR JUDITH SALO spoke in favor of amendment 1 revised. She said that it would make the fishermen in her area much more comfortable with the bill. Senator Kelly questioned setting up the executive board. Representative Hudson said that the amendment would eliminate the executive board. Senator Kelly said that he was satisfied with the amendment. Senator Kerttula MOVED for adoption of amendment 1 revised. No objections being heard, amendment 1 revised was ADOPTED. Senator Jacko asked what part of the state would contribute the majority of the tax money. Mr. Elton said that if it was evaluated by region, Bristol Bay would contribute the majority of the tax money. In answer to Senator Kelly, Representative Hudson said he had introduced separate legislation providing for a one percent assessment change. He felt it was not appropriate to include it in CSHB 275(FIN) because there had not been adequate time to analyze this assessment. Senator Jacko MOVED for adoption of amendment 2 (copy on file). Co-chair Pearce OBJECTED for discussion purposes. Senator Jacko explained that since the majority of the tax revenue would be realized from the Bristol Bay area, there was concern that this area was being asked to pay an additional tax. This area already is forced to pay a good amount of municipal and raw fish taxes. He explained that his amendment would require that the ASMI board would be comprised of 13 fishermen from the Bristol Bay, Alaska Peninsula, Bering Sea, or Yukon-Kuskokwim region. One member of the board would be a lay person selected by the Governor. He felt that this would insure representation by this area in the decision making process in regard to where the tax money is spent. In answer to Co-chair Pearce, Senator Jacko said the total number of board members would remain at 25 but representation of the board members would change. Representative Hudson voiced his opposition to amending the language of the bill and requiring all of the commercial fishing members be from the Bristol Bay, Alaska Peninsula, Bering Sea, or Yukon-Kuskokwim region. He said this would mean there would be no fishermen from the balance of the state of Alaska. Co-chair Pearce asked Senator Jacko's intent of the amendment. Senator Jacko answered that since 50 percent of the tax money would be received from that area that 50 percent of the board members should be from the area. Representative Hudson said that the purpose of CSHB 275(FIN) was to provide broad representation throughout the maritime regions of Alaska on the ASMI board to control not the only the domestic marketing program but to control all other aspects of the ASMI program. To only draw from this specific area to represent the entire coast of Alaska would be objectionable by fisherman in Cook Inlet, Prince William Sound, southeast Alaska and other areas. Discussion followed between Co-chair Pearce and Senator Jacko regarding other members of the board. It was determined that this amendment would say that all the fishermen on the board would have to be from Bristol Bay, Alaska Peninsula, Bering Sea, or Yukon-Kuskokwim region. Co-chair Pearce said that she could understand objections to the amendment. Recess 3:44pm Reconvene 4:00pm Co-chair Pearce announced that amendment 2 had been offered. Senator Kelly OBJECTED to amendment 2. Representative Hudson said that amendment 2 would break the bill's intent of having an even-handed approach between the processors and fishermen. The Governor makes these appointments and to require all fishermen to come from one region in Alaska would mean that the rest of the state would not be represented. He said this amendment would destroy the merits of this bill. Senator Kelly maintained his OBJECTION. JERRY MCCUNE, President, United Fisherman of Alaska, voiced his opposition to having all 13 fishermen from the Bristol Bay, Alaska Peninsula, Bering Sea, or Yukon-Kuskokwim region and asked how the other fishermen from areas such as Copper River and Kenai would be represented. Co-chair Frank said that there should be fair representation from all areas of Alaska. Senator Jacko said that the experience of most of the fishermen was that UFA was not that supportive of fishermen from southwestern Alaska. If this legislation was passed, processors in 1993 would pay $3.2 million and fishermen at 1% would pay $5 million. The majority of the $5 million would come from the regions he indicated in his amendment. Senator Jacko would support the number of processors reduced on the board in order to make room for other fishermen from other areas. Mr. Elton said that over the last 15 years, ASMI has gone to great lengths to not only include regional representation but gear type representation as well to insure that large processors and small operations were included in their program. He said that this tax could vary from year to year. ASMI is Alaska Seafood Marketing not just salmon marketing. He said he understood Senator Jacko's concern but a balance needed to be maintained for ASMI. He felt assured that ASMI would listen to all the different fishermen and regions regarding ASMI's marketing plans. Mr. McCune said that he would be willing to work with Senator Jacko regarding this amendment but he maintained his opposition to having all the fishermen coming from one region. Representative Hudson suggested that the words "commercial fishermen members shall be appointed proportional to the amount of salmon taxes by region to the extent possible" added to page 2, line 2. He said that this wording would provide legislative intent to the Governor in his appointment process giving consideration to those regions that pay the highest taxes. End SFC-93 #72, Side 2 Begin SFC-93 #74, Side 1 Senator Jacko said that he would consider amending his amendment 2 to include one fisherman from another part of Alaska. SENATOR BERT SHARP asked if there was any other tax in statutes that required fishermen other than the processors to contribute a salmon tax. Mr. Elton said there had been discussion about having 1 percent across the board on all different types of fishing. Mr. Elton said there are some groups that are in favor of that tax. The biggest problem facing the seafood market is the salmon market. The decision was made to see how this tax works in this bill and then another tax could be added later for other fisheries. Mr. Elton said that problems in the halibut and king crab market were being faced but at this time salmon is the main problem. Representative Hudson said that ASMI markets its products worldwide and millions of federal dollars have been used to try and enhance the marketplace of Alaskan products. This money can only be used for overseas marketing. Mr. Elton said that $8.5 million of federal dollars were spent this year, partially matched by the state. Representative Hudson said that one part of salmon marketing that has been missing for years is the fresh and frozen salmon. This present challenge is to increase the consumption of Alaska salmon in the domestic market. Alaska is not alone in its efforts to look to the domestic market. Japan, Chile, the Norwegians, New Zealanders, etc. are all looking at the U.S. domestic market. If this legislation would pass, ASMI should be able to bring the fishermen and processors together, moving them into the domestic market with more knowledge. He wanted to emphasize that the goal of increasing the domestic market for all fishermen and processors must not be lost in side issues. He asked the committee to consider the wording he had suggested for amending the bill. Recess 4:15pm Reconvene 4:50pm Co-chair Pearce announced that amendment 2 was still before the committee. Senator Kelly maintained his objection. Co- chair Pearce called for a show of hands and amendment 2 FAILED on a vote of 6 to 1. Co-chairs Pearce and Frank, Senators Rieger, Sharp, Kerttula, and Kelly opposed the amendment. Senator Jacko voted in support of amendment 2. Senator Jacko MOVED for adoption of amendment 3 (copy on file). Senator Kelly OBJECTED. Senator Kelly said he was opposed to the word majority in the amendment. Co-chair Frank said that this amendment would assure that there would be proportional representation on the board. Senator Kelly said that he was not sure that "majority" was proportional. Co-chair Frank said that it was not the number of fishermen but it should be proportionally based upon the value of the product. Senator Kelly maintained his objection to amendment 3. Co-chair Pearce called for a show of hands and amendment 3 passed on a vote of 4 to 3. Co-chairs Frank and Pearce, Senators Jacko, and Sharp voted in support of amendment 3. Senators Kerttula, Rieger and Kelly were opposed. DEAN PADDOCK, Bristol Bay Driftnetters Association, spoke in support of the original bill, HB 275. His association believed that Alaska was in desperate need of a domestic marketing program. He voiced his opposition to amendment 3 and would have preferred the wording as submitted by Representative Hudson. He said that getting Alaskan fishermen to work together was a difficult thing to accomplish. He feared that amendment 3 would polarize the fishermen and the processors. He reiterated that everyone needed to work together. He said that after attending meetings of the ASMI board and after contact with them, he had never had any problems. He hoped that this legislation would work for the good of all. Senator Kerttula MOVED for passage of SCSCSHB 275(FIN) as amended with individual recommendations and a fiscal note for the Department of Commerce & Economic Development for $5,640.3 and a fiscal note for Department of Revenue for $109.7 with revenue of $5,750. Senator Jacko OBJECTED. Co- chair Pearce called for show of hands and SCSCSHB 275(FIN) as amended was REPORTED OUT of committee with the accompanying fiscal notes on a vote of 4 to 3. Co-chairs Frank and Pearce signed "do pass." Senators Sharp, Kerttula, Rieger, Kelly, and Jacko signed "no recommendation." HOUSE JOINT RESOLUTION NO. 27: Relating to an amendment to the Constitution of the United States prohibiting desecration of the Flag of the United States. Co-chair Pearce announced that HJR 27 was before the committee. She invited Bill Stoltze, staff for Representative Ed Willis, to speak to the resolution. BILL STOLTZE said that HJR 27 asked Congress to pass a specific constitutional amendment prohibiting flag desecrations and requests several other states to join in this request. He said that 31 states had already submitted requests but that it would take 38 states to pass the amendment. He said that the American Legion and several other veterans' organizations were in support of this resolution. Senator Kelly MOVED for passage of HJR 27 with individual recommendations. No objections being heard, HJR 27 was REPORTED OUT of committee with a zero fiscal note from the House Judiciary Committee. Co-chair Frank and Senators Sharp, Jacko, Kelly and Kerttula signed a "do pass." Co- chair Pearce and Senator Rieger signed "no recommendation." ADJOURNMENT The meeting was adjourned at approximately 4:55 p.m.