Legislature(1993 - 1994)
02/15/1994 02:35 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE
February 15, 1994
2:35 p.m.
MEMBERS PRESENT
Senator Tim Kelly, Chairman
Senator Steve Rieger, Vice-Chairman
Senator Bert Sharp
Senator Judy Salo
MEMBERS ABSENT
Senator Georgianna Lincoln
OTHERS PRESENT
Senator George Jacko
COMMITTEE CALENDAR
SENATE BILL NO. 286
"An Act extending the termination date of the Board of Parole; and
providing for an effective date."
SENATE BILL NO. 251
"An Act relating to the commercial fishing revolving loan fund and
the fisheries enhancement revolving loan fund."
PREVIOUS SENATE COMMITTEE ACTION
SB 286 - NO PREVIOUS ACTION.
SB 251 - See Labor & Commerce minutes dated 2/10/94.
WITNESS REGISTER
Greg Winegar, Manager
Division of Investments
Dept. of Commerce & Economic Development
P.O. Box 34159
Juneau, Alaska 99803-4159
POSITION STATEMENT: Testified on SB 251.
Ray Gillespie
Assn. of Regional Aquaculture Associations
9478 Riverbend Court
Juneau, Alaska 99801
POSITION STATEMENT: Testified on SB 251
ACTION NARRATIVE
TAPE 94-9, SIDE A
Number 001
CHAIRMAN TIM KELLY called the Labor and Commerce Committee meeting g
to order at 2:35 p.m.
SENATOR KELLY introduced SB 286 (EXTEND BOARD OF PAROLE) sponsored
by the Senate Labor & Commerce Committee and explained he wanted to
expedite the bill. He also explained an audit was presently being
conducted, but has not yet been received; however, he said the next
committee of referral was the Judiciary Committee.
SENATOR SHARP moved to pass SENATE BILL NO. 286 (EXTEND BOARD OF
PAROLE) from committee with individual recommendations. Without
objections, so ordered.
SENATOR KELLY returned SB 251 (COMMERCIAL FISH LOANS FOR CERTAIN
OBLIGATIONS) to committee and announced a committee substitute had
been drafted by the Labor & Commerce Committee staff. SENATOR
KELLY reviewed some of his concerns on the original bill, and he
checked with SENATOR JACKO, who wanted an immediate effective date
put on the bill. SENATOR KELLY said an immediate effective date
would be in a new section on the final page of the committee
substitute.
SENATOR KELLY directed his committee aide, JOSH FINK to summarize
the committee substitute.
Number 043
MR. FINK began with page 2, where he explained the deletion of
child support payments in both the previous committee substitute as
well as the new one. On page 3, he said Section 2 is new and adds
three new details to the IRS loans, the first being the individual
must have filed past due tax obligations, must file past and
current tax returns with the IRS, and execute an agreement with the
federal government for repayment of past due federal tax
obligations. Secondly, it would cap the loan at $30 thousand, and
thirdly, it would allow the loan to be made to an individual only
once during that person's lifetime.
Going to a new Section 4, on page 4, MR. FINK explained it would
allow the commissioner to transfer 50% of the excess in the
commercial fishing loan fund to the fisheries enhancement fund.
He also explained Section 7 on page 4 is new and would provide that
the hatchery or other enhancement or rehabilitation activity for
which the loan is requested will provide a significant contribution
to common property fisheries, be operated in a manner beneficial to
the public interest, and be managed in a financially viable manner.
MR. FINK said the last section on page 5 would contain the
effective date.
SENATOR RIEGER referenced page 4, line 29, to question funds being
available under AS 16.10.340(c), and whether it should be a policy
generally, instead of only from the funds transferred from the
revolving loan fund.
Number 092
MR. FINK offered to look at the statutes to check the parameters in
current law.
SENATOR KELLY inquired if any one wanted to testify on SB 251, and
GREG WINEGAR, with the Division of Investments, thought he could
answer the question posed by SENATOR RIEGER in reference to page 4,
line 29 on the criteria for investments.
MR. WINEGAR explained that much of Section 7 contains provisions
which are accomplished already, and he explained how his division
had input into the process. He referred to the financial viability
of the hatchery facilities and explained the procedure the division
uses on each individual loan, if funds were transferred from the
commercial fishing fund into the fisheries enhancement fund.
SENATOR RIEGER didn't think that previous loans to the hatcheries
have paid back any money, notwithstanding the six year grace
period.
MR. WINEGAR explained there were a number of loans that have been
restructured, especially in recent seasons, where there has been
problems with returns and price, but he said a number of loans have
been repaid in full.
SENATOR RIEGER asked if there was a pattern of species which
allowed a greater return on the loans, or if it was, in previous
testimony, the geographic placement of the hatchery that determined
the repayment of the loans.
MR. WINEGAR reviewed assorted problems with different species, most
recently with the pink salmon, but he said it wasn't specific to
one species or area.
Number 145
SENATOR JACKO expressed concern about Section 2, page 3, line 31,
and page 3, line 1 "under (a)(1) of this section to satisfy past
due federal obligations may not exceed $30,000." He thought the
limit hampered the intent of the bill, since he knew there were
permit holders who owe more than that amount. He thought the
present borrowing limit was $300 thousand.
SENATOR KELLY said the committee substitute was written to make
certain that with a limited amount of funds available, it would
allow more people to take care of their problem, without the money
being used for fewer big loans. He didn't think anyone owing $100
thousand to the IRS deserved to keep their permit and fish in
Alaska, in his judgement. SENATOR KELLY said he was willing to let
the committee change the number, but he thought the $30,000 would
take care of 80% of the problems. He said he was more concerned
about the little person and not the big operators who owe such
large amounts.
Number 192
Next to testify was RAY GILLESPIE, representing the four Regional
Aquaculture Associations, who spoke to the hatchery program in
reference to Section 4 which allows the commissioner flexibility to
move excess funds from the commercial fishing loan program. In
talking to the department, he was told they have a sophisticated
method of forecasting loan demands, and there was no intention to
short change the commercial fishing loan program, or sacrifice it
for the benefit of the hatchery enhancement loans.
MR. GILLESPIE described the four regional aquaculture associations
he represents, formed by fishing organizations that vote on the
formation of the association, and self impose an enhancement tax on
themselves. He explained those types of hatchery loans are secured
by the enhancement taxes levied by the fishermen on their members.
He quoted state law which prevents any repeal of taxes until all of
the loans are repaid by the regional associations.
MR. GILLESPIE also described the category of loans to non-regional
aquaculture associations, which he said were not supported by the
same type of payment structure.
SENATOR RIEGER asked MR. GILLESPIE if he represented the "cost
recovery fishery."
MR. GILLESPIE explained the "cost recovery fishery" refers to an
activity that allows all hatcheries, regional and non-regional, to
sell a portion of the returning fish to cover part of the expenses
of the hatchery operation - including debt repayment. He said this
was done under the close scrutiny of the Department of Fish and
Game.
SENATOR KELLY directed attention to a table entitled LOAN PROGRAMS
CASH FLOW ANALYSIS - FY95 BUDGET PREPARATION, drafted on 1/11/94,
to the entry dealing with Fisheries Enhancement to show they loaned
out $8,372,400.00 in FY93, in FY94 $5,206,400.00, and in FY95 there
is the projected demand for $11,163,000.00.
SENATOR KELLY noted the Fishery Enhancement association expects to
receive about $10 million from the Commercial Fishing Revolving
Loan Fund in their FY95 loan request, and he asked MR. GILLESPIE
how the hatchery association expects to fund $11 million loans with
the $10 million. He asked whether MR. GILLESPIE'S group was also
asking for additional money.
MR. GILLESPIE explained they were asking that the Commissioner of
Commerce be given flexibility in the event there is excess funds in
the Commercial Fishing Revolving Loan Fund, and he also explained
they didn't have a specific request for a certain amount of money.
Number 251
SENATOR KELLY asked for anyone to speak who knows the projected
need for the income tax loans, because it would be a new concept
for the revolving loan fund. He said there was $14 million in
outstanding tax delinquencies amongst Alaskan residents with
fishing permits, and he wanted to know the source of the money.
MR. WINEGAR explained there was no new money forecast for the fund,
but there was a $5 million excess depending on the repayments and
the loan demand for limited entry permits and vessels.
SENATOR KELLY asked if there were plans to transfer $10 million
from the revolving loan fund account to the fisheries enhancement
fund. MR. WINEGAR explained that within the budget bill there was
a provision to add $9.9 million. SENATOR KELLY claimed they were
also looking for another $5 million in addition. MR. WINEGAR said
SENATOR KELLY was correct, and he explained the transfer process.
SENATOR KELLY questioned the anticipated loan amounts if the
legislature allows these types of tax loans. MR. WINEGAR said
there were no specific numbers, but he thought there would be a
fairly limited number of those meeting the criteria for debt
service and collateral.
SENATOR KELLY and MR. WINEGAR discussed the new type of loans, not
being able to anticipate the future, projected earnings, and two
different entities vying for the same pot of cash. SENATOR KELLY
thought there should be more work done on a way to fund the tax
payments, before any fund transactions are made with fisheries, but
he thought those decisions would be made in the finance committee.
SENATOR RIEGER asked MR. WINEGAR if his department was planning to
revise the projected loan demand and restructure taxes in the event
the bill was passed.
Number 301
MR. WINEGAR described the revisions that would be needed if SB 251
passed including those in another bill dealing with Individual
Fishing Quotas that would have an impact on the loan fund.
SENATOR KELLY said there would be a need for further revision with
the advent of refrigeration units in fishing vessels, which he
thought would present a significant loan requirement to be added
into the funding formula. MR. WINEGAR agreed and said it could
have an effect on the number of loans made.
SENATOR KELLY suggested MR. WINEGAR should take another look at the
assumptions on the loan requirements given the new obligations in
this bill, SB 251. MR. WINEGAR agreed there may not be any funds
available after funding the IRS payments to do any transfers,
depending on the new statutes.
SENATOR SALO asked for the number of permit holders who would take
advantage of the loan program. Any projections?
SENATOR KELLY said he only knew there were 1,173 permit holders who
didn't file income tax returns and another 1,111 that filed, but
owe a balance on their returns. He figured there were 2,283 permit
holders who owe money to the IRS out of the 8,800 limited entry
permit holders, of those 24% collectively owe about $14 million to
the IRS.
SENATOR SALO clarified that child support payments had been deleted
from SB 251, and SENATOR KELLY said it was. He asked for a motion
on the bill.
SENATOR RIEGER moved to adopt the new committee substitute for
Senate Bill No. 251. Without objections, so ordered.
SENATOR RIEGER moved to pass CS FOR SENATE BILL NO. 251(L&C)
(COMMERCIAL FISH LOANS FOR CERTAIN OBLIGATIONS) from committee with
individual recommendations and an immediate effective date in both
title and section. SENATOR SALO objected.
SENATOR SALO expressed concern the bill needed more scrutiny and
suggested it be kept in committee to examine both of the new
provisions in the committee substitute. She said her over all
concern was that these fishermen, who wanted to borrow money to pay
the IRS, did not seem to be good risks and had poor credit
histories.
SENATOR KELLY said those points have been discussed in a prior
meeting, and he agreed with some of her criticism. He asked MR.
WINEGAR to review the questions covered in the previous meeting on
the legislation.
Number 353
MR. WINEGAR explained many of these people would not qualify, and
he explained his department would apply the same sort of criteria
that is used in other parts of the loan program to the applicants.
He said they would look for adequate collateral and sufficient
income to repay the loan. He thought there would only be a small
percentage of the permit holders who would apply for an IRS loan.
SENATOR SHARP said that three of the legislators on the Labor and
Commerce Committee would be examining ramifications of the bill in
the Finance Committee, the next committee of referral. He thought
the scrutiny should be focused in the Finance Committee, and he
talked in terms of data he would like to have collected before the
committee meets.
SENATOR KELLY agreed to pass the bill from committee on SENATOR
SHARP'S conditions, and SENATOR SALO removed her objections.
SENATOR KELLY then declared CS FOR SENATE BILL NO. 251(L&C)
(COMMERCIAL FISH LOANS FOR CERTAIN OBLIGATIONS) passed from
committee with individual recommendations and an immediate
effective date in both title and section.
There being no further business to come before the committee, the
meeting was adjourned at 3:02 p.m. by SENATOR KELLY.
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