HOUSE BILL NO. 370 "An Act making an appropriation for relief of the 1997 fishery disaster in Bristol Bay and on the Kuskokwim River; and providing for an effective date." REPRESENTATIVE IVAN IVAN, (TESTIFIED VIA TELECONFERENCE), AKINK, explained that HB 370 requests $2.3 million dollars in general funds as a match for the $7 million federal dollars granted through the Magnuson-Stevens fund. The funds would provide for programs designed to assist communities and fishermen in the Kuskokwin and Bristol Bay regions which the Administration has been declared an economic disaster. The proclamation was issued in response to the poor fishing returns occurring in those areas. The State share would be $2.3 million dollars. He continued, with in-kind contributions provided by the communities and the Department of Community and Regional Affairs (DCRA), the actual amount requested from the Legislature would be $1.875 million dollars. The following programs would be funded from the appropriation: ? Community grant program for projects that are of direct and/or indirect benefit to the fisheries that sustain the economic viability of communities and would help to diversify the economy or assess the economic and social effects of the commercial fisheries failure. ? Loan programs to the Bristol Bay, Chignik and Kuskokwin permit holders who are in financial crisis. The Division of Investments at DCRA would administer the program. ? Economic planning in the Kuskokwin region. The funds would be used to enhance economic planning capability and/or continue economic planning process and procedures. ? Fisheries education, training and research such as smelt outmigration, salmon escarpment counts and selected resource management issues. Representative Ivan summarized that a portion of the funding would be used by DCRA to cover administrative costs associated with the program. REPRESENTATIVE JOE RYAN testified in support of the purposed legislation. He spoke about the intense poverty in village areas as a result of poor economic fishing conditions last summer. In those areas, some of the utility cooperatives have threatened to close, as the villagers have not been able to afford to pay their bills. Representative Ryan explained that DCRA initially requested federal funding, although, the Federal Emergency Management Agency (FEMA) stipulated that this type of economic disaster request would not fall under their privy. Following that meeting, the U.S. Department of Commerce stepped in; FEMA did not want to establish a precedent of granting money for this type of need because of the resulting repercussions which could occur in other states. Representative Ryan noted, following much discussion, the federal government agreed to help provide funding to create work projects in the villages so that they would be able to get "back on their feet". Unfortunately, that program will not come into effect until August 1998, after the next fishing season. A timing which would not address the current crisis. Representative Ryan reiterated that the people in this area are desperate and need Legislative help. He urged the Committee's support of the measure. Representative Martin questioned why the legislation had been limited to two regions while the entire area had experienced hardship. Co-Chair Hanley pointed out that there is criteria established by the federal government, which determines the disaster category. He clarified that this is a federal program in which the State would be requested to match. REPRESENTATIVE JERRY SANDERS commented that the majority of people affected by the fish shortage live in this area and have a very low yearly income. They often make less than $7 thousand dollars a year. He stressed that this funding would not help the "high-liners". The loans will be small and will need to be repaid. Co-Chair Hanley asked for further information regarding the Magnuson-Stevens federal act. MIKE IRWIN, COMMISSIONER, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS (DCRA), explained that last year was the first time funding had been available from the Magnuson- Stevens Act, which was established to address economic disasters. Section "312" of that act was crafted in 1995 following a crash in the Georgia fisheries. That request was denied. At that time, there had been enough impetus created and people affected, that the federal government agreed that there should be a program to help with those types of economic disasters. Alaska is the first State to have a secretarial declaration under the Magnuson-Stevens provision. On July 18, 1997, Governor Knowles claimed an economic disaster in the Bristol Bay and Kuskokwin areas. Bristol Bay and Kuskokwim seemed to fit the type of situation most appropriate by Section 312 standards of the Magnuson-Stevens Act. The federal government uses certain criteria to determine if there has been an economic disaster. The criteria address income and the amount of dependence that the area has on that source of income. DCRA was able to create a package that was acceptable to the federal government yet met the communities needs. HB 370 is comprised of 70% community block grants for fisheries, economic concerns and development enhancement. The remaining 30% would consist of a no-interest loan program for individuals who live in those communities. Representative Martin voiced concern in how broad the funding language of the legislation was. He noted that he would support helping individual's hardships, but questioned the community block grant aspects of the legislation. Commissioner Irwin explained that the committee substitute contains the amount that was included in the Governor's supplemental request for this funding. He explained that the way the federal government program works is that a certain amount of in-kind be required against the State's match. He agreed that the people of the area who are economically suffering, their needs should be addressed first. He guaranteed Committee members that the loan program would be the first aspect implemented. Commissioner Irwin commented that the people living in the villages have advocated for these projects. The programs match with language in the Magnuson-Stevens Act. This was a way in which the community as a whole could develop some infrastructure and enhancement for future wages. There is $1.86 million dollars set aside for the loan program, providing an economic benefit in the amount of $1 thousand dollars per person. The community works project would not be able to begin until the end of the winter. Co-Chair Hanley asked if there are restrictions within federal law which prohibited DCRA from loaning more than $1 thousand dollars per person. Commissioner Irwin replied that there was not a limit established; these would be "no-interest" loans and the Permanent Fund Dividend (PFD) could be used as collateral. Representative Kelly believed that it would be more advantageous to take the entire amount provided by the federal government and make larger loans available to those living in the village area. He suggested that the public works project probably would not work in an area where the resident's fish as fishing is what they do and generally they are not interested in other job markets. Commissioner Irwin understood Representative Kelly's concern. He emphasized that the people living in these regions initially did not want the loan program. U.S. Congress stressed the need to implement the program. He stated that the proposed projects would enhance the community while also meeting the objectives of the Magnuson-Stevens Act. Representative Kelly reiterated that if it was the intent to help people during this economic need, that should be addressed during the loan process. He stated that the public works projects should be addressed in a competitive process in the Capital Budget. Co-Chair Therriault asked what an "in-kind" contribution from DCRA would consist of. Commissioner Irwin replied that the Department has accumulated a lot of staff time and travel dollars. In response to the fisheries disaster, which began last July, DCRA has spent close to $200 thousand dollars. Those expenses will not be prorated, although, the Department's expectation is that in moving forward, there will be in-kind contributions to help defray the costs. Co-Chair Therriault asked DCRA's program support and general fund dollars attached with it. Commissioner Irwin replied that 2% of the overall program cost would be allocated to the Department for in-kind support expenses. Co-Chair Therriault inquired the length of the loans. Commissioner Irwin replied initially it had been four years but now it might have been changed to two years. He reiterated that borrowers have the option of using their PFD's as collateral. (Tape Change HFC 98- 47, Side 2). In response to Representative Therriault's query, Commissioner Irwin touched on community project possibilities to be undertaken to improve that quality of life in those areas. Representative G. Davis pointed out that the economic disaster was affecting more than just the fishermen, although, the loan was not being offered to any others. Commissioner Irwin stated that there was not enough money to go around. He added that there is a program through the Small Business Association (SBA) for getting small businesses 4% loans available primarily for people involved in the fisheries communities. Co-Chair Hanley asked what would count as a match toward federal funds. Commissioner Irwin stated that the Department of Commerce had accepted DCRA's formula for community and local in-kind matching determined by a federal percentage. Co-Chair Hanley asked if the $3 million dollars for FEMA would be considered a match. Commissioner Irwin advised that it would not. Every state dollar spent has to be matched by three federal dollars. Federal money will be available the week of March 7th. The economic disaster determination was made by the congressional delegation. He commented that a formula had not been used to make that determination. Co-Chair Hanley asked if some of the money could be used too pay the utility providers. Commissioner Irwin replied that the funding could not be used to subsidize fuel sales. The local utilities would need to rely upon people receiving loan money to pay back their utility bills. Co-Chair Hanley inquired if there were non-residents eligible for the loans. Commissioner Irwin advised that they could possibly qualify. It would be based upon permit holding in one of the selected areas. There will be limitations in calculating the percent of the annual household income from the fishery. In order to qualify for the loan program, a person must make 51% or more of their income in that fishery. Representative Martin commented that it appeared most of the funds would be distributed to the Administration rather than going to those in need. Commissioner Irwin responded that administrative costs would amount to 2% of the total funds. Representative Foster asked if assistance would be limited to the list of villages named in the bill. Commissioner Irwin replied that they would be available to the permit holders in the Bristol Bay and Kuskokwin River region. Co- Chair Hanley pointed out that permit holders could get the loans no matter where they live if they meet the criteria. Community grants would be limited to communities listed in the bill. Co-Chair Hanley agreed that the loans were essential, whereas, he felt that the economic development concerns require further discussion in order to be placed on the fast track time-sensitive supplemental. He did not think that diversification of the economy would help the fishermen. Commissioner Irwin pointed out that initially, the U.S. Department of Commerce specified that there would be no direct grants administered. DCRA struggled to convince the feds that the proposed legislation would be a way to get funds into the pockets of the villagers. The proposed community works program would provide the best long term help for the villages. Because the federal government is paying for the bulk of the program, DCRA is forced to opt for these expenditures. To not include these programs which comprise 70% of the proposal, DCRA would have to renegotiate with Congress. He warned such action could slow up the process or even make it "dead in the water". Co-Chair Hanley voiced his frustration with the program and how well it will ultimately affect the people in those areas. Representative Ivan advised that the response team had created the best program possible so to receive the direct grant for the individuals living in the village areas. He urged the Committee's support for the legislation. HB 370 was HELD in Committee for further consideration. (Tape Change HFC 98- 48, Side 1).