Legislature(1993 - 1994)
03/11/1994 09:00 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
JOINT SENATE AND HOUSE FINANCE COMMITTEE
March 11, 1994
9:00 a.m.
TAPES
SFC-94, #37, Side 1 (000-end)
SFC-94, #37, Side 2 (end-000)
SFC-94, #39, Side 1 (000-450)
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 9:00 a.m.
PRESENT
The following Senate and House Finance members were present:
Co-chair Pearce Representative
Grussendorf
Co-chair Frank Representative Martin
Senator Jacko
Senator Rieger
Senator Sharp
(Senators Kerttula, Kelly, Representatives Larson, MacLean,
Brown, Foster, Hanley, Hoffman, Parnell and Therriault did
not attend.)
ALSO ATTENDING: Former Governor Jay Hammond; Senator Leman;
Representatives Carl Moses, Cliff Davidson, Fran Ulmer, and
Con Bunde; Bruce Schactler, salmon seiner, Kodiak; Peggy
Moore, salmon setnetter and seiner, Cook Inlet; Bart Eaton,
processor, Trident Seafoods; Ken Gross, salmon gillnetter,
Southeast; Eugene Asicksik, salmon gillnetter, AYK; Dick
Jacobson, salmon seiner, Alaska Peninsula; Dan Hull, salmon
gillnetter, Prince William Sound; Nels Anderson, salmon
gillnetter, Bristol Bay/Chignik; Jim Bacon, salmon seiner,
Southeast; McKie Campbell, Deputy Commissioner, Department
of Fish & Game; Kim Elton, Executive Director, Alaska
Seafood Marketing Institute, Department of Commerce &
Economic Development; Paul Fuhs, Commissioner, Department of
Commerce & Economic Development; representatives of the
media, aides to committee members and other members of the
legislature.
VIA TELECONFERENCE: The following sites were listen only:
Anchorage, Bethel, Cordova, Dillingham, Glennallen, Homer,
Kodiak, Kotzebue, Ketchikan, Nome, Petersburg, Seward,
Sitka, Valdez, Sand Point, Wrangell, and Port Protection.
SUMMARY INFORMATION
Statewide Salmon Forum Agenda
1. Former Governor Jay Hammond - Overview
2. Bruce Schactler, salmon seiner, Kodiak
Topic: Benefits of Salmon Industry to State
3. Peggy Moore, salmon setnetter and seiner, Cook
Inlet
Topic: Markets and Marketing
4. Bart Eaton, processor, Trident Seafoods
Ken Gross, salmon gillnetter, southeast
Topic: Quality and Cost of Regulatory Compliance
5. Eugene Asicksik, salmon gillnetter, AYK
Topic: Value-Added Production
6. Dick Jacobson, salmon seiner, Alaska Peninsula
Topic: Impact to Local Governments
7. Dan Hull, salmon gillnetter, Prince William Sound
Topic: Individual Fisherman Costs and Income
8. Nels Anderson, salmon gillnetter, Bristol
Bay/Chignik
Topic: Loss of Permits, Effect on Region
9. Jim Bacon, salmon seiner, southeast
Topic: ADF&G Management and Research Budget
10. Former Governor Jay Hammond - Conclusion
STATEWIDE SALMON FORUM:
CO-CHAIR DRUE PEARCE welcomed former Governor Jay Hammond to
the table for an overview of the Statewide Salmon Forum and
introduction of speakers.
FORMER GOVERNOR JAY HAMMOND said he was surprised but
appreciated the opportunity to facilitate this function. At
first he thought he would be called on the carpet for
recently advocating a sliding scale royalty on limited entry
permits, or maybe be asked to do penance for other alleged
sins of commission. He admitted he had introduced
legislation that created the Board of Fish & Game over
violent protests from some individuals. Later, one of his
bills doubled the fish tax on municipalities. Two other
bills he advocated giving advantages to resident over non-
resident fishermen were struck down by the courts. While he
was mayor of the Bristol Bay borough, he enacted the first
local raw fish tax in the state. Although, engulfing the
borough in millions of dollars, it enraged the fishermen who
lived elsewhere who paid 90 percent of the tax. Later, he
did nothing to cool their anger by promoting the sliding
gear scale and pooling regulation. Despite the protest of
many from elsewhere, it far better accomplished limited
entry in Bristol Bay on behalf of local Alaskans than did
the current limited entry system.
He found atonement was not at all what his hosts had in
mind. Instead, they asked him to MC what might appear to be
the worst, most ill-timed, sales pitch ever, in light of
current financial conditions confronting the state and the
budget concerns of this legislature. The objective of the
forum was to try to convince the legislature, that
fisheries, unlike any other natural resource in the state,
could yield a profitable return on investment. He cited
studies that indicated such investments already did, as
subsequent panelists would attest. He pleaded that the
state not be penny-wise, pound-foolish, by curbing the
essential fisheries related investment dollars which yield a
profit. Reducing those dollars would do nothing but further
stagger an industry already reeling under a "1-2 punch" of
depressed prices and increased competition. Today, he said,
a broad range of presentations would be heard which
reflected the differences encountered in the fishing
industry. However, they were not here to whine or complain,
but to outline facts that might not be readily apparent,
realized, or understood. Even with his extensive fishing
background as both a drift and setnet fisherman since the
days of sailboats in Bristol Bay, he would learn from the
testimony today.
He hoped proposals would emerge from these discussions that
would permit our fisheries to rise up from the canvas and
get a second wind. In 1899, Congress imposed a tax on the
Alaskan canned salmon industry, 50 percent of which was to
be deposited in the so-called Alaska fund to pay for the
cost of territorial government. In the past, the territory
of Alaska could not have survived financially without
salmon. It is unlikely the state of Alaska could do so
today and still bear much resemblance to the kind of place
in which most of us choose to live. He hoped the forum
would be informative and provocative, and on behalf of the
panel, he thanked the committee for the opportunity to
present the fishermen's case which, he reminded them, is
their case as well. In speaking for everyone, he said
fishermen looked forward to continuing the long-standing
partnership with the state to further mutual interests.
With that, former Governor Hammond introduced Bruce
Schactler, salmon seiner from Kodiak, who would speak to the
benefits of the salmon industry to the state.
BRUCE SCHACTLER said he was a salmon seiner and had lived in
Kodiak for 25 years. He participated in as many fisheries
as he could to keep his business intact. He reiterated what
former Governor Hammond had said, that the Alaskan salmon
industry was about 100 years old, and the largest employer
in the state employing over 35,000. Also, the fishing
industry, a non-renewable resource, was the largest
contributor to the state's economy except for oil. It
produced more seafood than any of the other seafood
countries of the world and Alaska was only a state. He
wanted everyone to know that this industry was paying its
way in the state. There was a tremendous investment, not
only by the state, but by the private sector. As much as
$87M had gone into the general fund from all the different
programs, assessments, and taxes, from the fishing industry.
This included programs and benefits which were not only
beneficial to the fishing industry, but mutually beneficial
to tourism, timber, mineral, and even oil development. The
communities also benefited by roads and other infrastructure
that is required to support the fishing industry. In rural
Alaska, the salmon industry virtually supports the
communities 100 percent other than government. In Kodiak,
over 50 percent of the personal income is from fisheries.
That percentage gets higher in the smaller communities that
do not have the diversification that larger ones may have
such as a Coast Guard base. In the little communities,
salmon runs the town. He felt it was difficult to estimate
the investment by the private sector, but assumed it was
billions of dollars.
He went on to say that there were 500 processing plants
along the coast of Alaska, most of which, if not still,
originally dealt with salmon alone, and as the fisheries
have expanded, so have the plants. The raw fish tax that
was placed on the fishing industry was designed to pay for
the fisheries management, and the state's business with
fisheries. He noted it was doing this and more. In
actuality, the fishermen were investing more in the state
than the fishermen were receiving in return, dollar for
dollar. The hidden benefits to the state that come from the
fishing industry were all around, for example, the houses we
live in, and the property we own. When the season's over,
fishermen go to Anchorage, to Cosco, and spend their money.
He felt it was a little known fact that Anchorage was the
largest fishing community in Alaska. It had more fishing
permits than any town by almost double.
The seafood volume of salmon is 50 percent of the x-vessel
value landed in the sate of Alaska, even with the huge
bottom fish industry of $400M that has steam-rolled in the
last ten years. Over $135M was spent in labor and related
costs. Another $45M was spent on groceries, gear, and
services. In 1993, over $18M in raw fish taxes, local
taxes, aquaculture associations, ASMI, and self-imposed
taxes had been collected to support the fishing industry.
The aquaculture associations are some of the largest
corporations within the state with investments in the $100s
of millions, some completely liquid, without debt. The
state cannot do without these type of industries. The
salmon industry, besides the largest employer, has the
longest season. This year seven months. This is an
industry that is happening in the communities and lasts
almost 75 percent of the year. The fishermen are coming
into the communities buying groceries, fuel, etc. on each
side of the season, fixing their boats and gear. Without
salmon, the coastal communities would not be able to exist.
The salmon fishery is a resident business, 78 percent of the
residents hold all the permits and half of those are in
rural Alaska. The largest portion are in Anchorage.
He went on to say that the industry has had its ups and
downs over the last 100 years, but what is going on right
now was not a cycle. The world had changed, the business
had changed, and this downturn was not a cycle. Unless
something radically changed, this downturn will not reverse.
The state was in the same position as the fishermen. If
fishermen are only getting 12 cents a pound for their
salmon, the general fund is cut proportionately. He
compared it to the plight of the automobile industry in the
early 80s. The industry had to retool, close plants, and
change their whole operation and had been very successful.
Now American car sales have overtaken import sales. The
fishing industry was going to have to undertake such a move,
and it would have to be a cooperative endeavor to be
successful.
Every time a fisherman loses a penny a pound in the price of
salmon, that equals $7M lost to the fishermen of Alaska. In
the past five years, fishermen have lost approximately 50
cents a pound, quite a sum. He said between 1992 and 1993,
the state had lost $8M in taxes because of depressed salmon
prices. If we lose 10 cents a pound, that equals $4.5M in
tax revenues. Over the last five years, that equals over
$30M a year in lost revenue, dollars sorely missed by the
state.
He said that the state and the fishermen had been in this
together for over 100 years. The state historically had
done its part in supporting the salmon resource but he
wanted to remind the legislature of its continued reliance
on this industry and resource, a driving source especially
in rural Alaska. The salmon industry is Alaska. The state
must continue to work with the fishing industry if we want
life and government in Alaska to continue. The state
revenues are declining and the most visible way to increase
it was the seafood industry. It would be a direct benefit
to the state. The industry was going to need new research,
and market development. He believed that marketing, and
research and development went hand in hand. Industry was
going to do it, and fishermen must do it. Fishermen were
funding 100 percent of the marketing at present and the
state needed to act as a partner to support that any way it
could. He felt it would take at least a 20-cent a pound
increase to sustain the industry since the fishermen were
already losing money. If the price was raised 20 cents a
pound it would mean $150M to the fishermen, and $10M to the
state in raw fish taxes.
In conclusion, Mr. Schactler reiterated that the fishing
industry was paying its own way, and supporting the state in
many ways. he encouraged the legislature not to take this
industry for granted, and not assume that it would always be
there. He wanted the state to give its commitment as a
partner in supporting the industry without asking for more
unjustified taxes or assessments.
The next speaker introduced was Peggy Moore, salmon
setnetter and seiner from Cook Inlet, and her topic was
markets and marketing.
PEGGY MOORE said she was an owner-operator in the seafood
industry, better known as a commercial fisherman. She
harvested salmon in Cook Inlet as a setnetter, and in Prince
William Sound as a seiner. She also participated in the
herring seine fishery in Cook Inlet and Togiak. She said
she would like to talk about what was happening to her
business and why this should be the state's business too.
She felt changes should be made in marketing. Salmon were a
common property resource that provided a net gain to the
general fund and also helped support our boroughs and
communities. This industry and the jobs it provided were at
risk. The industry was in the midst of a dramatic change,
moving to be driven by marketing rather than production.
The state had managed its resources well. Fishermen were
becoming more sophisticated in their harvest methods and
industrial salmon producers were pumping out more and more
farmed salmon. In addition, Russian salmon production was a
threat to our foreign markets, especially Japan. Alaska's
share of the Japanese market had dropped from 85 percent in
1988 to 57 percent in 1992. This was a direct result of
salmon production in Russia and Chile.
She believed production was not the problem. There was an
abundance of salmon but not enough interest in Alaska's
salmon stocks. She knew there was no lack of consumers or
customers. The state just needed to do a better job of
marketing our products. First, research must be done to
realize what the public wants, and then develop quality
salmon markets to meet those demands. Finally, the public
must become aware of Alaskan products through marketing. As
an example of marketing, she asked how many Alaskan homes
have a can of the "T" word (tuna) in their cupboards. She
called tuna a marketing success story. She knew there was
no reason Alaskan salmon could not capture a large share of
that domestic market.
To summarize the problems, she said salmon production, in
the last 15 years, had gone from 850 million pounds per year
to 2.6 billion pounds per year, while consumption had grown
from 850 million pounds to 2.3 billion pounds. This left a
300 million pound gap between production and consumption,
which limited fishermen like herself, from making a profit.
It also limited the state's ability to preserve the only
resource industry, other than oil and gas, that provided a
net gain to the general fund.
As policy makers, legislators play a vital role in this
scenario. Over the past three years, study groups had
identified the following market problems. First, an anemic
market. The dairy and pork industry spend $56M a year on
marketing. Last year, the salmon industry spent less than
$5M for domestic marketing of Alaskan salmon - a very small
amount. Secondly, a weakened fish management team. The
Fish and Game budget has been repeatedly cut while the
duties of commercial fish biologists have been expanded.
Effective management was imperative to insure the continued
viability of our fishery resources. Thirdly, new products.
The Alaska Fisheries Development Foundation was the product
development component that brought about the new surimi
industry. New products are an important key to successful
marketing. Fewer investment dollars, on the private side of
our economy profit margins, have declined due to reduced
prices. On the public side, committed federal and state
funds have all but vanished.
These problems should mean something to the legislature.
The very important fact was that the fishing industry was
the coastal economy from Dillingham to Ketchikan and every
port in between. The industry provided jobs for Alaskans
and played a major role in the economic stability of the
state. Alaska should not only recognize but promote the
salmon industry in much the same way that Florida promotes
citrus, Washington promotes apples, and Kansas, wheat. Can
we afford to neglect Alaska's number one renewable resource,
making it a net economic loser to the state general fund
rather than a contributor? The answer obviously is no. The
state has had a long standing financial vested interest in
the salmon industry. Alaska's resources, including salmon,
belong to Alaskans, and the legislature manages them on
behalf of its citizens. We all need to realize that we, the
state, manage, market and support the business plan
components of research and development, and it directly
effects the value of our fish.
She reminded everyone it was not how many fish were
harvested but the quality of those fish and how they got to
market. Product viability, variety, and promotion would
insure that value. It would not only add to the fishermen
and the processors' profits, but to the general fund
revenues. The state had invested $100s of millions in the
salmon industry and the private sector had invested another
$5 billion in plants, boats and equipment. She stressed
these investments and her viability as a small business
owner were at stake if the state did not come to grips with
the reality that value equals quality. First, we must
provide quality products, and then we need to vigorously
market those products. We need to educate the public on the
health benefits of eating salmon, and the superior quality
of wild salmon versus farmed, and let people know, that, if
handled properly, fresh-frozen was a very marketable and
diverse product.
Since 1988, U.S. salmon consumption had increased from half
a pound per person to 1.2 pounds per person. There was
definitely a demand for salmon, but farmed fish had been
allowed to dominate that market. The fishing industry and
the state needed to form a working partnership in order to
encourage research and product development, new investments,
management, and salmon promotion. Through aggressive
marketing, she felt Alaska could increase its share of the
salmon market and thus increase x-vessel prices to
fishermen, profits to processors, and revenue to the general
fund. This would benefit all Alaskans.
ASMI's new salmon marketing committee, which was created
through the harvesters' assessment legislation last session,
had just accepted a proposal from the National Seafood
Educators to undertake an Alaska Salmon Health and Nutrition
Education Campaign for consumers in conjunction with the
National Heart Association. More of this positive marketing
needed to happen. Effective marketing was expensive and the
state needed to play a partnership role in this area as it
does in the oil, timber and tourism industries. She
encouraged the legislators to consider their role in the
economic viability of the salmon industry. She also asked
that they remember the contribution to the general fund by
commercial fishing when going through the budget process and
when voting for bills that could help the fishing industry.
In answer to Co-chair Frank, a member of the audience said
the sales increase in salmon was in the fresh market.
Unfortunately, she said the increase in imported farmed
salmon had been 30 to 90 million pounds during that time.
Senator Jacko said processors in other industries played a
large role in developing new markets. He asked if Ms. Moore
thought the fish processors were attempting to develop or
pursue those markets. Ms. Moore said she personally felt
the processors could play a larger role but the state also
needed to help.
Senator Sharp felt that the aquaculture industry should help
by supplying farmed fish during the salmon's off season in
order to stay competitive. Ms. Moore reiterated that if
salmon was handled properly, fresh-frozen was an extremely
viable product. She really believed that the public needed
to be educated in this area.
Bart Eaton, processor, Trident Seafoods, and Ken Gross, a
gillnetter, were invited to the table by former Governor
Hammond. Their topic was quality and cost of regulatory
compliance.
BART EATON joked that he and Mr. Gross were invited to the
table at the same time to see how long they could sit
together and survive. The audience thoroughly enjoyed this
comment and Co-chair Pearce said she would start the timer.
Mr. Eaton said that Trident Seafoods had a cannery in
Ketchikan, North Naknek, South Naknek, a fish support
operation at Clark's Point, a white fish and salmon plant in
Sand Point, and a plant at Akutan. He personally fished in
Kodiak for years for salmon, shrimp and crab and fished on
the Bering Sea. He had also served on the North Pacific
Council for two terms. What he wanted to comment on was his
perception of the salmon business today. He felt it would
be instructive for all to think about other wild renewable
resources around the world and what they had endured. His
examples were rubber in Brazil and spices in east Asia.
Both of these products, like Alaskan wild salmon, were very
unique. The market problem must be addressed immediately.
The fishing industry could not afford to lose its customers.
Getting them back after losing them would be even harder.
He suggested the competition must also be examined. Norway
and Chile had a national policy to develop farmed fish and
even though these countries had gone through several stages
of bankruptcy in developing farmed fish, the government had
bailed them out and their costs were becoming quite
streamlined. He confirmed that Alaska wild salmon was the
best there was if only a system could be created between the
fishermen and the processor so that good quality fish could
get to the U.S. and world customers. The fishing industry
needed government support in creating a system to insure a
quality product at a lower cost. In the end, the industry
had to be a low cost producer or the market would continue
to be lost.
He complimented the Seafood Task Force and said it had
helped with communication between regulators and fishermen.
He also complimented Commissioner Paul Fuhs for his help in
this area, and all other commissioners that were involved.
One main issue was that processors operate under the same
restrictions for housing for short term employees as if the
bunkhouse was to be used year-round. The state requirement
of 60 square feet per employee, while the same federal
requirement was only 50, and off-shore vessels require only
18, made it very prohibitive to build a unit that was used
only 3 or 4 weeks out of the year. He would like to see
some flexibility in the regulations for short seasons.
The days were gone when volume fish was the goal. Now
quality pounds was imperative. He felt that Fish & Game
regulations, quality impact statements and their
implications should be examined. A conscious decision
(regarding allocations, etc.) should be made based on true
costs to the industry and how it impacts quality.
KEN GROSS introduced himself as a southeast gillnetter who
had been marketing all his own fish for the last several
years. He wanted to share his views regarding fishing and
marketing problems. When he first decided to market his
fish, and made inquiries, the response was poor. Consumers
loved the taste and red color, especially sockeye, of
Alaskan wild salmon but response was poor because about half
of the salmon received on the market had not been taken care
of properly by the fishermen or processors. He believed
that regulations must be changed to ensure the quality of
the fish assuring a longer shelf life and a more consistent
product for markets.
End SFC-93 #37, Side 1
Begin SFC-93 #37, Side 2
In his desire to do his own sales, he continued to take
excellent care of his fish, and slowly carved out a market
for himself. Demand increased the next year because he had
maintained the high quality of his fish. He then asked
other fishermen to join him and his market continued to
increase. He wanted to assure the forum that farmed fish
were no competition for Alaskan wild salmon. What was
missing is the fishermen's incentive to ice immediately and
in every way provide a quality product. He gave an example
of a restaurant in New York that finally trusted his quality
and now his Alaskan wild salmon was in high demand. He felt
the Russian salmon was "garbage." He felt the public's
outlook needed to be shift and regulations changed so the
Alaskan salmon could achieve the equivalent to the
"starbucks" name and quality.
REPRESENTATIVE BUNDE agreed that salmon connoisseurs would
prefer Alaskan salmon but the average salmon buyer, the
majority of consumers, would not be able to compare a farmed
fish and an Alaskan wild salmon.
Mr. Gross said one reason small fish stores were not buying
Alaskan salmon was because the shelf life was so much
shorter than farmed fish. Farmed fish were bled immediately
while still alive, which increases their shelf life up to
three days. The Alaska name was preferred and will continue
to be bought if consumers do not get "burned." Quality was
why the market had problems. He assured the audience that
the small grocer or seafood market would prefer to sell
Alaskan salmon if the price was the same and the quality was
good.
Representative Bunde had knowledge of a recent test with the
general public where farmed fish had been chosen over
Alaskan salmon. Mr. Gross wanted to know who did the test
and the condition of the Alaskan salmon. Representative
Bunde congratulated Mr. Gross on his marketing techniques
but felt the general public were not salmon connoisseurs and
price the most important component.
SENATOR RIEGER commented on his problems with the
infrastructure, airlines, etc. He wanted to know if farmed
fish could create a year-round infrastructure that Alaskan
salmon could use and help support during its season. Mr.
Gross said that some restaurants combine farmed and wild
fish for flavor and color, so that could be an option.
In answer to Co-chair Frank, Mr. Gross said that his fish
sold on the fresh market but there was a window for frozen
salmon as well. He went on to explain the disadvantage of
not selling through a broker because of the increase of 10
cents per pound if boxes shipped weighed less than 2,000
pounds. Mr. Gross agreed that his broker probably also
dealt in farmed fish.
In answer to Senator Jacko, Mr. Eaton repeated regulations
for off-shore processors were 18 square feet per employee,
in Alaska 60, and federal were 50 square feet. He agreed
that off-shore processors had an advantage.
Representative Davidson said that the battle of farmed fish
vs wild salmon had been fought for several years and
continued to be fought in the political process. He asked
if an emphasis should be put on wild salmon and would then
put off even longer the idea of farming fish in Alaska. Mr.
Eaton voiced his opinion that Alaska was the largest most
successful salmon farm in the world, and if we took care of
the stocks and streams, we could maintain that reputation.
He agreed that there might be options to look at as far as
farmed fish and that quantum leaps had been made in the
industry as far as feed, etc. However, he did not believe
the world needed more salmon volume.
Eugene Asicksik, salmon gillnetter, AYK, was the next
speaker and his topic was value-added production.
EUGENE ASICKSIK remarked that because of the expected
continuation of high production levels and record high
salmon inventories there was little hope that salmon prices
would recover under current conditions. The AYK had seen
some chum and king salmon harvest decline. He felt one of
the most important ways to increase the value of our salmon
was by adding value ourselves, therefore increasing the
demand for salmon by making it available to consumers in new
and more convenient products. It would also increase local
employment by expanding processing job opportunities. He
pointed out this was particularly important in rural Alaska
where commercial fishing provided the only cash economy to
the region.
The single, largest road block to value added production and
new product forms was the lack of an efficient mechanical
method of pinbone removal from salmon. This past summer
Norton Sound Community Development Quota (CDQ) Group worked
with their harvesting partner, Glacier Fish Co., to produce
boneless, skinless, pink, salmon blocks. This product form
is used by the European and U.S. food industry to
manufacture more convenient frozen food products, and was an
important development for the North Sound fishermen who have
been unable to secure buyers for their pink salmon for
several years. In order to meet the product specification,
the fishermen were required to bleed, chill, ice, and use
brailer bags in handling their fish. Glacier Fish Co.
brought in one of their factory trawlers which had high
speed pollack filleting machines on board that could process
200 fillets per minute. Since there was not adequate
pinbone removal the machinery had to be stopped and that
process had to be done by hand.
While the North Sound CDQ Group and its partners had no
trouble finding markets for the salmon product, making a
profit was difficult. Success of these product forms will
never be realized until salmon pinbones can be removed
efficiently. Other value-added salmon product development
efforts are being pursued by the CDQ groups representing
communities on the Yukon Delta Kuskokwin and Aleutian
region. (He said that he would not go into statistics since
a report would soon be delivered to the members' offices.)
In order for these plants to be successful, ice production,
and cold storage capacity needed to increase. These
improvements would increase the quality needed for new
product forms and allow the local plants to hold fish longer
so it can be processed into value added products. These
infrastructure developments are needed statewide. The
Alaskan salmon industry needs the support of the state and
its agencies in providing infrastructure support like
increase ice, cold storage capacity, and value added
processing facilities so that industry participants can
afford to make the investment risk and move forward. The
current market collapse does not permit individual industry
participants to take these risks alone.
Dick Jacobson, salmon seiner, Alaska Peninsula, then spoke
to his topic - impact to local governments.
DICK JACOBSON said over the last two years, Alaska had
encouraged regional governments to be formed and bills had
been introduced to encourage them to tax and support
themselves. Coastal Alaska almost completely depends on
seafood resources to do that. He was mayor of a community
typical of Kodiak, and other regions. About 82 percent of
their revenues came from seafood resources. About 42
percent come from their own tax, the rest from revenue
sharing, etc. from the state. These statistics show how
dependent these communities are on seafood. In Bristol Bay,
where the bottom fish and pollack fisheries are not
available, dependency on salmon is even higher. Regional
and local governments must provide services for the
infrastructure such as health, public safety, water and
sewer, transportation, fuel service, and solid waste.
Services that are required by the fishing industry, in
general, include off-shore services as well as on-shore.
The off-shore services do not provide any income so it is
critical to have a support and a working relationship with
the state. Regional government that has been encouraged to
develop needed legislative support.
Over the last couple of years, local revenues have taken
quite a hit. Just in salmon alone, there had been
approximately a 30 percent decrease in income and this year
it could reach 50 percent. The services would still be
required and the cost for those services continue to rise.
He felt the local communities were in an even more severe
situation than the state because the local communities did
not have oil revenues for help.
Senator Jacko added that Mr. Jacobson, in addition to being
mayor, was a member of the Fish Board.
Representative Davidson said he wanted to note the
significance of funds going to local governments.
Dan Hull, salmon gillnetter in Prince William Sound, spoke
to the individual fisherman's costs and income.
DAN HULL provided a handout titled "Economic Information on
the Prince William Sound Salmon Fisheries," (copy on file,
Attachment C). He said it was the best information
available at this time. The first two graphs showed
estimated average revenues and costs for PWS drift gillnet
and purse seine holders for the years 1977-1993. He felt it
was more effective to describe these visuals as the income
and expenses of the small businessmen and women who work in
the fishing industry. He pointed out that there was an
increasing amount of women involved in fisheries. He also
noted that estimates were conservative and did not include
costs associated with permit payments but it did show the
ups and downs in the fishery for these men and women and how
disastrous the past three years had been for them. Purse
seiners had been especially hit hard. As a gillnetter, he
had fared a little better than average since he got into it
before the high permit prices. He wanted to emphasize the
problems were structural and worldwide and were not expected
to get better.
In answer to Senator Rieger, Mr. Hull said these graphs took
into account all salmon species. The next graph showed
revenues and expenses to the PWS Aqua Corp. in FY 1990-94,
the same trend as that of the fishermen. Their current
return of fish was at 30 percent. In 1990, in anticipation
of poor returns, larger harvests were made in order to pay
for future operations. He felt it was a wise move but now
those monies have been spent and revenues were not keeping
up with expenses. Responsibilities have also increased with
the addition of several facilities, and sport fish releases
in Whittier and Valdez. Evaluation costs had increased and
a product development and marketing project for pink salmon
had started. Award winning salmon chowder was one outcome
of this product development.
The next graph showed the real dollar value of pink salmon
in PWS from 1977 to 1993. In 1977, in real dollars, it was
a little over 80 cents, and the last few years it had been
below 20 cents a pound. Aside from 1987-89, there had been
a steady decline. Low salmon prices was the primary reason
the industry was in trouble effecting both fishermen and
aquaculture.
The last graph was an estimate of the salmon fisheries on
the economy of PWS and Seward, based on a recent evaluation
through the Alaska Fisheries Economic Assessment model done
by Craig Weese with the Marine Advisory Program. The total
impact of salmon fisheries (direct, indirect, and the
induced economic impact) was over $58M and the impact of the
salmon enhancement program, $21M. He was unable to decipher
the model for Anchorage and other parts of Alaska, but
planned to work out those figures as well.
In conclusion, he voiced his opinion that fishermen,
processors, and the state must work together to find
solutions to this problem and develop a relationship with
the legislature to introduce and initiate those solutions.
Senator Jacko pointed out that Mr. Hull's presentation
showed the gross misconception of consistent profit margins
in the fishing industry. Also, although the presentation
only showed PWS, he pointed out that fishermen everywhere
were facing the same problem. In fact, in some instances
where revenues dipped below the fixed costs, and the fixed
costs were controlled by the processors, crew shares were
not even getting paid.
Senator Rieger asked if hatcheries were producing species
other than pinks. Mr. Hull said that in 1991, the first
returns of sockeye, chum, and coho had been returning.
Again, in answer to Senator Rieger, Mr. Hull said that each
region differs. In Cook Inlet there were minimal cost
recovery harvests (fish returning to the hatchery).
Operating costs were based on the enhancement tax revenues
that were assessed on all harvests. The primary production
was pink salmon. There are constraints on facilities to
change over to other species. To raise chum, for example,
fresh water rearing space was needed and there was no
capital money available to build in that requirement.
In answer to Representative Davidson, Mr. Hull said that
other user groups benefited but no revenues were received
from them.
In answer to Co-chair Frank, Mr. Hull explained that average
capital costs were an estimate of vessel and gear costs
amortized over a 15-year period, and agreed that it was
likened to the interest and principle on a 15-year payment
authorization.
Senator Jacko pointed out that it would be interesting to
see the average capital costs today compared to 10 or 15
years ago. Mr. Hull said purse seiners' costs were based on
a 1979 survey so this graph was a conservative estimate in
relationship to 1993 dollars. Senator Jacko said there was
a concern in the industry of over-capitalization.
Nels Anderson, salmon gillnetter in Bristol Bay and Chignik,
was introduced. His topic was addressing loss of permits,
and its effect on the region.
NELS ANDERSON said he came in place of gillnetter, Robin
Samualson. He had fished most of his life in Bristol Bay as
a setnetter and gillnetter and retired in 1967. He had
represented Bristol Bay for years in the legislature and
felt confident that he could carry area concerns to this
forum.
Everyone had been speaking to economic and structural
issues, but Mr. Anderson pointed out that a person could not
fish unless he had purchased an expensive limited entry
permit and then invested in a boat, gear, crew, insurance
and covered all other costs that go with that permit. In
general, Alaskans have fared well in the limited entry
permit system. Even with the net losses and gains, Alaskan
residents own 78 percent of more than 10,000 of all limited
entry permits. More than half of the Alaskan permits were
held by rural Alaskans where commercial fishing was the
primary source of cash. The initial ranking of applicants
was determined by demonstrating economic hardship and past
participation. However, generally speaking, there were no
transfer restrictions. The primary method of transfer was
not selling permits but gifting them to other Alaskans.
Limited entry permits were initially issued in 1975 and
require a vessel and gear.
Limited entry permits were a valuable license but only as
valuable as the species being fished. In Bristol Bay, the
benchmark for the salmon industry, prices had dropped over
70 percent since the 1988 salmon season. For all salmon
fishermen statewide, the value of their catch had dropped
drastically in the last several years. In the past three
years, more than 1,200 requests for loan extensions from the
state's revolving loan fund have been processed by the
Department of Commerce and Economic Development. That stake
equals $130M loaned to salmon fisheries and aquaculture
associations. Despite the severe economic conditions facing
fishermen, the default rate of state commercial fishing
loans was only 4 percent, lowest of any state program.
Limited entry permits can be used for collateral by only the
state loan program and the SeaFab loan program. Permits are
not only valuable to individuals but represent an important
security and a valuable commodity to the state. The market
system, however, discriminates against those that are not as
wealthy and cannot as easily obtain financing. As a result,
this skews permits away from rural residents who for the
most part do not have good credit history or the ability to
capitalize entry into the fishery. He went on the say it
was not the primary problem since most permits are being
gifted to family members.
The primary and most significant problem was the IRS's
threat to seize permits. The IRS has shown no qualms about
seizing a permit for repayment of debt even if the debt was
only worth a fraction of the value of the permit. The IRS
had identified over 1,200 limited permit holders that have
outstanding tax debt, the total estimated to be $14M. This
was a direct symptom of hard times. Compliance rates are no
worse for fishermen than for other small businesses
throughout the country. A major difference was that the IRS
can seize a permit and completely wipe out a fisherman's
earning potential. Another factor in the IRS problem was
that the IRS had access to fish tickets which allow them to
reconstruct past earnings. The largest area of non-
compliance was in rural Alaska, the majority village
fishermen. A federal judge had ruled that limited entry
permits were a type of property that could be seized by the
IRS for repayment of tax debt. IRS seized them because of
their high value.
As most of you know, the cultural profile of rural fishermen
is primarily a subsistence lifestyle supplemented by cash
from the salmon industry. There are some clear cultural and
language difficulties between people who are native vs non-
native. Village fishermen were not as profit oriented as
urban or non-resident fishermen. The fishing industry was
changing and becoming more of a year-round business. Most
villages hold their subsistence activities as their first
priority and income from salmon fishing supplements
subsistence. Historical reliance on the cannery has been
there for a hundred years as a source of financing for boats
and permits.
These days more out-reach facilities for help in financing
operations are to be found such as the Bristol Bay Economic
Corp. and the Alaska Business Development Center. Even
though the IRS was a major problem, there had been an
attempt to work with the IRS to insure as few permits as
possible were put on the auction block. Financial awareness
training was being conducted in cooperation with the Alaska
Business Development Center so people could receive help in
these areas.
End SFC-93 #37, Side 2
Begin SFC-93 #39, Side 1
The Bristol Bay Economic Development Corp., a CDQ
organization, is run by a 14-member board of directors. A
lot of people were happy that a brokerage presence had been
established in Bristol Bay along with counseling programs
and IRS workshops. The main objective under the permit
stabilization program was to stop the out-migration of
permits from Bristol Bay. The permit brokerage had tried to
bring a marriage between Bristol Bay and those permits
available for sale. Just recently, the Bristol Bay Native
Assoc. had established a blue ribbon task force on the
permit system. Former Governor Hammond was a member as well
as Ed Rasmussen, Bruce Twomley, Harvey Samuelson, John
Christenson and himself. The committee will meet several
times to develop recommendations on the economic
implications of permits leaving Bristol Bay and the Chignik
areas. The committee will also research the native
population. He reiterated the overall objective of the
committee was to develop a long term strategy to slow the
out-migration of permits from the Bristol Bay region.
Co-chair Pearce announced that SB 251, Commercial Fish Loans
for Certain Obligations, would be heard on Saturday, March
12, 1994. She informed the forum that the general public's
response to that bill had been very negative. She urged the
fishing community to build support for the bill so that the
legislature could bring it to the floor.
In answer to Representative Davidson, Mr. Anderson said that
both the Bristol Bay Economic Development Corp. and the
Bristol Bay Native Assoc. met with limited success in trying
to work with the IRS. Mr. Anderson said he went directly to
Anchorage and met with Dave Tucker, IRS representative in
Alaska, and explained the effect of their program on the
Bristol Bay people and the disruption it caused in people's
lives. He received a positive response from the meeting but
he had heard conflicting reports from the villages that the
collection program was continuing. He believed work would
continue on this issue and hoped for positive results.
In answer to Representative Davidson, Mr. Anderson said that
the Bristol Bay Permit Brokerage, Inc. hesitated to become
involved in a loan program since the outstanding debt was
approximately $14M. However, since the area cannot afford
to lose those permits to non-resident fishermen, the
organization would look at all options.
Senator Jacko applauded the brokerage program. Mr. Anderson
said that as soon as there was knowledge of a permit for
sale, people were notified in the villages and then work was
done with the existing financing organizations to help
secure funds to purchase the permits. Beyond that,
counseling services would be available so people could learn
how to run their business, how to keep costs down, etc.
Jim Bacon, salmon seiner from Southeast, was introduced as
the next speaker. His topic was ADF&G's management and
research budget.
JIM BACON agreed that the salmon industry had been the
backbone of the commercial fisheries since the beginning of
documented commerce in Alaska. The salmon harvest total,
over the last 100 years, was more than 6 billion fish. That
was enough for every person in the world to have one fish,
although, he joked, some would want two. The industry has
had its ups and downs, and was, by nature, cyclical.
However, the pressure now confronting the industry was more
intense than ever experienced before. It was important to
remember that the news was not all bad. Management and
research for fisheries, good ocean survival, and a little
luck had kept Alaska on an upward trend in production.
He went on to say that the present budget situation affected
all state agencies and their programs. The agency critical
to today's topic was the one charged as caretakers of our
fisheries resources, the Department of Fish and Game. He
chose not to repeat the numbers relating to the state and
the job base, but reminded the joint committee that those
figures reflect favorably on the investment the state has
put towards fish management.
It had also been stated that the commercial fishing industry
paid its own way in terms of management, research,
enforcement, and administration. He felt the fishing
industry could surpass paying its way to a greater degree if
it were in a position to direct more efforts towards
management and research. When information was not
available, Fish & Game was forced to manage conservatively.
This meant that harvest opportunities were foregone
translating into revenues lost to the state. Better
information leads to more effective utilization of the
resource, and of course, greater benefits to the state.
Fish and Game cannot explore these opportunities when it is
trying to survive with only a core management and research
program for major fisheries. What the legislature intends
to do relative to Fish & Game's budget had not been seen as
yet, but he feared further cuts. He stressed, since Fish &
Game had sustained significant cuts over the last few years,
further reductions would seriously effect the salmon
industry and the commercial fishing industry as a whole.
He pointed out that Fish & Game had a series of issues in
the national and international arenas that require their
attention. One example in Southeast was the U.S. Canada
Pacific Salmon Treaty. The issues effecting the state's
interest in these treaty negotiations kept increasing and
the state must be there, not only as a participant, but as a
leader. Every loss realized in these negotiations
translated to lost revenue and put further constraints on
the fishing industry.
The Department of Fish & Game also played a major role in
the management of fisheries within the 200-mile exclusive
economic zone. These activities also involve a number of
international treaties. Habitat issues all over the state
must be addressed if all of the resource industries were to
function effectively. The Pacific Northwest, Washington,
Oregon, and Idaho were now looking at staggering costs in
trying to address the loss of fish production in their
waters, a loss brought on in part, by the loss of habitat.
In Alaska, we have the opportunity to avoid these kinds of
staggering costs with proper planning and commitment to all
of our resource industries. Stock assessments through well-
designed research programs need to occur. Conservation was
the bottom line. If we do not have sufficient money to fund
research programs than conservation was at risk. He named
just some of the areas in which Fish & Game must be involved
to be good caretakers of the salmon industry. He reiterated
the fact that state revenues derived from the commercial
fishing industry surpassed Fish & Game's general fund
budget. He said they were not asking for a new deal program
but were here to present factual information about the
salmon industry and, hopefully, convince the legislature
that we were all in this together, not just for the short
term, but the long term. The fishing industry pledges to
solve the issues it could. It requested that the state
become its partner and provide the Department of Fish & Game
with an adequate budget.
Representative Davidson again underscored the significance
of Mr. Bacon's remarks and hoped they reached the ears of
those that allocated the budget dollars.
In closing remarks, former Governor Hammond said although he
was there to talk fish, he might have to "eat a bit of
crow." He had once pronounced that while it came close, the
fishing industry did not pay its way, and now he saw the
error of his words. Not only had the fishing industry paid
its way, it may render a substantial profit that was not
easily understood to the general public. Some studies even
suggested that it returned 97 cents on the dollar. If all
the general fund dollars invested were considered, it would
be substantially greater. That did not take into account
the monies that were returned to local government entities
which were a selected benefit to the state.
Now, he believed, his view should have included a collective
benefit. He had suggested years ago that the type of fish
tax should have been in the form of an advalorem tax such as
the oil pipeline tax, so all citizens of the state could
have seen some discernible benefit accruing to them from the
fisheries. One of the reasons he was concerned, was the
diminishment of public support brought on by the aggravation
and antagonism that had developed between sport,
subsistence, commercial and regional groups. Also, many
Alaskans do not have the privilege to fish because they do
not have limited entry permits. That possibly could have
been overcome if the state had imposed a royalty appended to
the limited entry permit so a portion went into the
permanent fund for a modest dividend.
He knew his timing was poor, but other processes could have
been permitted such as an imposition of a royalty that would
have only impacted non-resident fishermen. He did not want
to go into details today, but one of his major concerns was
the enormous amount of untapped revenues leaving the state
in the pockets of non-residents. He knew there were ways of
accessing these revenues and encouraged that they be
explored.
He again admitted he had been wrong and that the fishing
industry more than paid its way. Rather than cutting those
investment dollars, he asked the legislature to at least
sustain the present situation, or even dare to enhance it.
In regard to the limited entry permit situation, he had been
under the assumption that there were more permits going to
non-residents. He said, however, there continued to be a
slow migration of permits to non-residents, and in the long
term, that was just as terminal. He believed there were
means and methods of stopping that and referred to existing
pending legislation before committees. He said some would
take into account the elderly fisherman that wished to leave
his permit to his grandchild. At the present time, if that
fisherman chose not to fish, he could only get an emergency
transfer for one year and needed another medical condition
for any other year's transfer. He thought this was poorly
structured. In consulting with the limited entry
commission, he understood there were means by which to
address this situation without putting it into a regulation.
The Commission was concerned about putting it into law
because it could eliminate those alternate means altogether.
He would like to see a clear-cut, easily understood method
where people leaving the fishery would have an option other
than simply selling their permit. He cautioned that pending
legislation may not deal with this issues in the best
interests of the fishermen.
Former Governor Hammond felt the other problem was that the
state had over-capitalized the fishery. First, the limited
entry program adopted required the purchase of an expensive
permit. He felt regulations put in place before limited
entry permits worked much better. Also, now expensive boats
were also needed in Bristol Bay to be competitive. All the
salmon in Bristol Bay could have been harvested in river
mouths with nets and skiffs. Management and regulatory
processes have forced people to over-capitalize, and that
has another spin-off. In order to sustain the investment in
the over-capitalization, state loans, etc., the state cannot
back off and deny those folks a substantial amount of the
harvest since they need it to stay solvent.
He repeated that the fishing industry was reeling under a 1-
2 punch of depressed prices and increased competition. He
feared many people were going to be forced out of business.
The ones that did not have huge investments were going to
survive. The extent to which the state tried to help those
in trouble had to be looked at very carefully. He wished he
could offer a happy prognosis. He urged the legislature to
look at the budget with the idea that the fishing industry
wanted to stay in partnership with the state government.
Cutting back on the Department of Fish & Game budgets, for
instance, would not make the budget more economically
stable, but would, in fact, have the opposite effect.
He thanked the committee for their time and the participants
for coming to speak. Co-chair Pearce thanked Senator Jacko
and Representative Moses for requesting the forum.
Representative Moses thanked the Department of Commerce,
Department of Fish & Game, Limited Entry Commission, and
ASMI for all their input and assistance. He particularly
thanked Commissioner Fuhs and the aides involved and former
Governor Hammond for his participation. He acknowledged the
fine attendance of the Senate but was disappointed in lack
of attendance by the House.
Senator Jacko stressed the significance of the Salmon Forum
and thanked the fishermen for their unity in appearance
today.
ADJOURNMENT
The meeting was adjourned at approximately 11:00 a.m.
| Document Name | Date/Time | Subjects |
|---|