HOUSE BILL NO. 73 "An Act extending the termination dates of the salmon marketing programs of the Alaska Seafood Marketing Institute and the salmon marketing assessment; and providing for an effective date." REPRESENATIVE BILL HUDSON testified in support of HB 73. He noted that the legislation would extend the 1-percent domestic salmon marketing assessment, which would otherwise sunset on June 30, 1998. He observed that the industry has suffered from low returns and competition from farm salmon. He emphasized the importance of marketing. He observed that the amount and manner of collection would not be changed. Revenues from the tax assessment would be approximately $2.35 million dollars in FY 98. Representative Martin questioned if the industry should administer the program. He asked the amount of general fund dollars spent by the Department of Revenue to collect the tax. Representative Hudson noted that the buyer collects from the harvester. The Department of Revenue collects and accounts for the assessment. He observed that the law states that the Legislature may appropriate the funds back to the Alaska Seafood Marketing Institute (ASMI). He spoke in support of maintaining state collection of the assessment. He emphasized that the State of Alaska manages and oversees program quality and coordinates all aspects of the industry, including growth and development. Representative Martin reiterated that private enterprise "left to its own, would do the best for itself." Co-Chair Therriault observed that the tax is a designated receipt passed through to ASMI. He noted that there is no mechanism to force the private sector to join an association and pay dues. Representative Hudson clarified that there are no general fund dollars in the program. The tax is collected from the harvester and the processor. There is no general fund match. He observed that federal dollars were matched with processor fees. He noted that funding was taken from the domestic market and used as a state match for federal funding of the overseas program. In response to a question by Representative Kelly, Representative Hudson explained how taxes are distributed within ASMI. There are three sources of funds for ASMI. ASMI receives federal funds through the federal overseas marketing program in the Department of Agriculture. This amounts to approximately $3.4 million dollars, which is appropriated through the Legislative Budget and Audit Committee. These funds require a state match of approximately $500 hundred thousand dollars and can only be spent on overseas markets. Processors voted to initiate a self-assessment of three-tenths of a percent on every pound of fish purchased. The one-percent marketing tax was an effort to move into the domestic market when Norwegian farmed salmon began to usurp Alaskan product. Representative Kohring questioned if government is the appropriate vehicle to collect taxes. Representative Davis noted that the Department of Revenue administers the program. BARBARA BELKNAP, DIRECTOR, ALASKA SEAFOOD MARKETING INSTITUTE clarified that the Department of Revenue collects the assessment as part of the three-percent municipal fish tax. One-percent goes to ASMI and two-percent goes to the municipalities. Representative Hudson acknowledged that there is probably some cost to the Department of Revenue for the collection of the tax. He emphasized that the cost is minimal. MIKE GREANY, DIRECTOR, LEGISLATIVE FINANCE DIVISION clarified that the are no unrestricted direct general funds appropriated to match the federal funds. He explained that the assessments are not classified as part of the statutory designated funds. They remain general fund program receipts because of their status as a tax. All funds collected for the program are accounted for separately and reappropriated to the program. Co-Chair Therriault pointed out that the Department of Commerce and Economic Development's fiscal note should be corrected to reflect the assessment's status as general fund program receipts. Mr. Greany observed that the fish taxes were not included as designated program receipts. He explained that the Constitution (Article IX, Section 7) states that all proceeds from any state tax shall not be dedicated to any special purpose. These funds remain part of the state treasury. He noted that general fund program receipts go to the general fund, but are accounted for separately. He acknowledged that funds that are not considered part of the general fund are often perceived as dedicated funds. He observed that appropriations are divided into general funds or other funds. General fund program receipts are designated as "general funds". Designated program receipts are designated as "other funds". Representative Davies maintained that it is appropriate for these funds to be included in the "other funds" category. Representative Martin referred to "shared taxes". Mr. Greany clarified that the legislation does not pertain to shared taxes. DEAN PADDOCK, JUNEAU testified in support of the legislation. He observed that the State of Alaska serves as a pass through for the funds. He urged that the program remain a state collection. He asserted that the majority of fishermen will support the assessment as long as they are confident the funds will be used by ASMI. He stressed that the assessment benefits the entire State of Alaska. He maintained that tax collection is one of the legitimate functions of state government. REPRESENTATIVE ALAN AUSTERMAN spoke in support of the legislation. He stressed that the State receives revenues from the fish Alaskans sell on the open market, the more fish sold the more money the state makes. He noted that, in FY 96, the Raw Fish Tax amounted to over $7 million dollars. He stressed that fisheries business taxes, in FY 96, raised over $18 million dollars. He emphasized that revenues offset any cost to the Department of Revenue. REPRESENTATIVE KIM ELTON responded to questions raised by previous comments. He observed that the ASMI board has discussed privatization. He noted that former Governor Hickel requested that ASMI end their privatization effort at the time of the Bristol Bay salmon strike. He emphasized that ASMI is funded through industry dollars. He compared efforts of the tourism and fisheries industries to fund their effort. He observed that the Alaska Visitors Association (AVA) is still using state and local tax dollars. Representative Grussendorf MOVED to report HB 73 out of Committee with accompanying corrected fiscal notes. Co- Chair Therriault stated that the Department of Commerce and Economic Development's fiscal note would be corrected to reflect the proper fund source. HB 73 was REPORTED out of Committee with a "do pass" recommendation and with two fiscal impact notes, one by the Department of Commerce and Economic Development and one by the Department of Revenue.