CS FOR SENATE BILL NO. 107(FIN) An Act relating to tourism and tourism marketing; eliminating the Alaska Tourism Marketing Council; and providing for an effective date. JOE BALASH, STAFF, REPRESENTATIVE GENE THERRIAULT, pointed out that CS SB 107 (FIN) was the companion bill to HB 136 which previously had been heard in the House Finance Committee. Mr. Balash spoke to the changes between the two bills. TINA LINDGREN, EXECUTIVE DIRECTOR, ALASKA VISITORS ASSOCIATION (AVA), ANCHORAGE, touched upon the plan of the bill. She commented that the bill before the Committee is the product of several years effort. The actual wording was agreed to by the Alaska Visitors Association and the Administration. She hoped that the bill would pass. A transition team has already begun the work of establishing a new organization and to date, a number of people have enrolled. The idea is that industry will create a new organization that combines the Alaska Tourism Marketing Council (ATMC) and the Alaska Visitors Association (AVA) and the marketing functions of the Division. Passing the bill will provide that the process move forward. Representative J. Davies asked how realistic is it to assume that financing will be raised through the private sector. Ms. Lindgren stated that this will not be an easy challenge, however, there has been a $2 million dollar commitment from major players. She acknowledged that the community portion of $1 million dollars will be more difficult to raise. Representative J. Davies advised that he would continue to support implementation of a statewide tourism tax. SENATOR JERRY MACKIE spoke in support of the Senate Finance Committee (SFC) version of the legislation. He pointed out that everything in that version concurred with the proposed House Finance Committee (HFC) version and that the SFC had adopted the fiscal notes brought forward by the HFC. He confirmed that the fiscal notes are appropriate and support the changes made to the legislation. Mr. Baylash explained the difference between the fiscal notes prepared by the SFC and the HFC. He advised that the two fiscal notes proposed by HFC address the tourism BRU within the Department of Commerce and Economic Development; SFC did adopt fiscal notes identical in numbers to the ones drafted. In FY00, the pertinent note for the Alaska Tourism Marketing Council (ATMC) numbers indicate personal services, travel and contractual and are listed as requested in the Governor's budget. In the Tourism Development component, the FY00 Division of Tourism fiscal note, there is a $200 hundred thousand-dollar difference in the contractual line. Mr. Baylash suggested that the Department no longer needs authority to receive and expend that funding. Additionally, there is a $100 thousand dollar reduction to the personal service line. That number was based on a FY01 projection. The Director of the Division has resigned and it is believed that additional turnover will occur. Rather than deleting specific positions, $100 thousand dollars was deleted from the entire line in order that it could be absorbed in other areas of their program. Mr. Baylash continued, the reduction was based on part to the millenium plan and partially to the legislation. The other $700 hundred thousand dollars will be used for the operations and staffing for the Division of Tourism. In subsequent years, FY02 and FY03, the contractual line will decrease each year by $500 thousand dollars as the State's contribution to the marketing effort is ratcheted down. GINNY FAY, ACTING DIRECTOR, DIVISION OF TOURISM, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, spoke to the difference in the fiscal notes. She pointed out that the ATMC fiscal note submitted by the Division is close to the same as the HFC proposed note. The big difference is to the Tourism Development note. The note submitted by the Department is based on current tourism funding by the State. Presently, the State of Alaska pays $5.3 million dollars total tourism funding, of which, $3.3 million dollars of that is a contract through ATMC, $1.2 million dollars is program receipts, and that industry provides a 25% match for the Tourism Marketing contract, and $2.2 million to the Division of Tourism. Ms. Fay continued, the marketing provided by the State of Alaska is done in two pieces. One portion is handled by ATMC and the other is international marketing addressed by the Division of Tourism. The Department's fiscal note envisions that after the merger occurs, the marketing done by contract now through the Division and that done by contract through ATMC will be one large contract with the qualified trade association. The Department's contractual line indicates the addition of both of those marketing contracts. Ms. Fay advised that the personal service line is an area of major difference. Between the two fiscal notes, there will be six state employees that vacate. The Department does not know what the qualified trade association will be doing as all the marketing currently is done by the State through contract. She assumed that the Administration would be handling the additional work of ATMC without additional staff. That Division continues to do the work that they are currently doing now and will assumed the new obligations. She emphasized that the current workload can not be handled without any additional staff. Senator Mackie understood the Department's concern, however, addressed the need of compromising considering the State's economic budget. He stated that the Division of Tourism does not need to remain the same as it is now since they will not no longer be marketing. He noted that what is reflected in the fiscal notes involves general funding, program receipts and designated program receipts. In the current year, the State is spending just over $7 million dollars for tourism. In the prepared legislative fiscal notes, that amount will be $6.7 million dollars a $300 thousand dollars reduction. He believed that reduction would not decimate the Division of Tourism and could provide a reasonable funding level for the transition. Representative J. Davies inquired if there are other function areas of tourism besides the marketing effort. Ms. Fay explained that there are many services provided that are not related to marketing as travel into the State, permitting on federal lands and land use planning. The Department also works closely with communities as they try to develop tourism in their areas. She emphasized that there continues to be growth and need for information on developing tourist opportunities especially in rural Alaska. Currently there is insufficient staffing to do the development functions related to tourism. Ms. Fay advised that it would be difficult to assume the role of overseeing in-put on the large contract with current staffing. Agreement has occurred among all businesses because the State was willing to oversee the contract to guarantee that businesses and communities benefit from tourism activities within the State. Ms. Fay argued that the current Division of Tourism fiscal note will begin to de-staff that Division, loosing the ability to have a reasonably active role in the contract. Representative J. Davies commented that the funding cut could decimate the work of the Division. Co-Chair Therriault interjected that the proposed funding should be adequate. Senator Mackie agreed that nothing was being decimated with the proposed level of funding. Ms. Fay pointed out that in FY00, the Division would not remain whole with a $100 thousand dollar reduction, affecting five positions. Representative J. Davies MOVED an amendment to the Division of Tourism fiscal note. He proposed a change to the FY01 note adding $100 thousand dollars to personal services, adding $40 thousand dollars to the travel line, and subtracting $200 thousand dollars from the contractual line making it would be a net zero amendment. The employee position line would increase from six to eight. Representative Austerman OBJECTED. (Tape Change HFC 99 - 115, Side 2). Representative Austerman suggested that the biggest change would be in FY01. The difference then between what the Department wants and what the Legislature would be doing would not be that significant. Senator Mackie noted that the net change would be zero, however, the effect would be $200 thousand dollars less in marketing, going to personal services and travel. The $200 thousand dollars that would be reduced to marketing would create an additional loss of $500 thousand dollars because of the 60% match. Representative J. Davies explained that the intent by making the shift was to have a continued effort in rural development tourism. Representative Austerman stated that effort would be made through a $60 thousand dollar grant already included. Representative J. Davies emphasized that the present level of funding is not adequate. A roll call vote was taken on the motion made on the Division of Tourism fiscal note. IN FAVOR: Moses, J. Davies, Grussendorf OPPOSED: Austerman, Bunde, G. Davis, Foster, Kohring, Therriault Representatives Williams and Co-Chair Mulder were not present for the vote. The MOTION FAILED (3-6). Representative Bunde MOVED to report CS SB 107 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS SB 107 (FIN) was reported out of Committee with "no recommendation" and with two fiscal notes by the House Finance Committee.