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
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                             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.                        

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