HOUSE BILL NO. 80 "An Act establishing the sport fishing hatchery facilities account; establishing the sport fishing facility surcharge; and providing for an effective date." 9:23:51 AM DOUG VINCENT-LANG, COMMISSIONER, DEPARTMENT OF FISH AND GAME (via teleconference), shared that the governor's bill was supported by the department and was one of its session priorities. He read from a prepared statement: A little background before I begin will add some needed perspective. In 2005, the legislature approved a bond measure to construct two sportfish hatcheries, the William Jack Hernandez hatchery in Anchorage and the Ruth Barnett hatchery in Fairbanks. I was involved in the construct and passage of this legislation. To receive the bond, the Department of Fish and Game had crafted a repayment plan that was unprecedented. A surcharge was added to sportfishing licenses, nearly all of which went directly to the repayment of the bond, less $500,000, which went to Southeast Alaska annually for hatchery production since this area was not serviced by the two bonded hatcheries, yet fishermen paid the surcharge. No general fund dollars were used to pay back the bonds. Sport angler dollars matched by federal DJ funds paid the bill and the bonds were principally paid for by nonresidents. Let me repeat this. We built two state-of-the-art hatcheries using no general fund receipts and the license fee surcharge used to pay the bonds was overwhelmingly collected from nonresidents. This unique plan worked so well that the department paid this bond back five-years early in calendar year 2020. As a result, the surcharge, and all associated statutes sunset on December 31, 2020. With the loss of the surcharge however, we have ongoing maintenance obligations with these hatcheries. Examples include installation of PFAS filters, installation and start up, testing of a third production well, and purchase and installation of UV disinfection units at the Fairbanks hatchery. At the Anchorage hatchery, examples include evaluation, design, and construction of a formal concentrated effluent disposal system, boiler system upgrade and replacement, oxygen system upgrade and replacement, and well development. This legislation would establish a funding source to ensure that these long-term deferred maintenance costs are covered. We could pay for this using Fish and Game Fund money, but this would come at the expense of other projects as these funds are already fully allocated. Additionally, upon repayment of the bond, there was an immediate loss of $500,000 funding impact to Southeast Alaska from the loss of the surcharge income, which funds the raising and rearing of over $1.4 million chinook salmon and hundreds of thousands of coho smolt at release sites targeted to benefit sport anglers in Southeast Alaska inside waters. Losing this level of funding to support existing enhancement activities will be detrimental to Southeast Alaska sport anglers and charter operators, which have already been highly impacted by lack of out-of-state travelers due to COVID travel restrictions. 9:26:50 AM Commissioner Vincent-Lang continued to read from prepared remarks: It will also allow us to address deferred maintenance issues at the Crystal Lake hatchery in Southeast Alaska, which is state-owned, but operated by PNP partner. This hatchery is the backbone to the sportfish hatchery program in Southeast Alaska. To address these issues, we worked with user groups across Alaska to propose a new, but reduced surcharge that would be used to support hatchery maintenance and support continued nonprofit hatchery operations in Southeast Alaska without impacting other important work currently underway and funded by the Fish and Game Fund. This legislation reinstates a reduced surcharge to support hatchery maintenance and nonprofit hatchery operations in Southeast Alaska. A reduction of what was being collected by $5.00 across the board. This leaves residents with a $4.00 surcharge and nonresidents contributing the lion's share, four or five times what residents contribute. The proposed surcharge would be a 60 percent reduction for residents and an overall 34 percent from the original surcharge fee. In your packets you will see a license fee breakdown for both residents and nonresidents. If this legislation passes, the department proposes to again collect the surcharge and deposit it into a separate subaccount within the Fish and Game Fund to be accounted for and used only for the state's sportfish enhancement programs and sportfish facilities and to continue to support enhancement activities in Southeast Alaska. Again, recognizing these anglers pay the surcharge, yet are not serviced by the two sportfish hatcheries. We would use the generated funds as match to incoming federal DJ funds, thereby increasing our purchasing power by 75 percent as federal DJ funds can be matched 3 to 1. House Fisheries amended this bill to add an additional $2.50 surcharge to fund work related to fisheries management, fisheries research, invasive species management, and habitat restoration. This language is broad enough in my opinion to cover improvement of access for sport fishermen. It also requires separate accounting of these additionally collected funds. As you can see from the fact sheet in your packages, the overall sportfish enhancement programs released nearly 7.2 million fish in nearly 270 locations annually. That in addition to the 1.4 million that are released in Southeast Alaska would provide thousands of anglers with additional fishing opportunities, providing a large economic boost to Southeast Alaska businesses. Again, I want to thank you for the opportunity to come and present this bill. I urge your support for this important legislation and am willing to answer any questions you may have. If the committee would like, Ms. Hanke is prepared to go over a sectional analysis. Co-Chair Merrick asked to hear from Ms. Hanke. 9:29:25 AM RACHEL HANKE, LEGISLATIVE LIAISON, DEPARTMENT OF FISH AND GAME (via teleconference), reviewed a sectional analysis (copy on file): Section 1 Adds new section AS 16.05.130(h) which creates a new sub-account of the fish and game fund called the sport fishing enhancement account. This section also restricts the use of the sub-account to maintenance and operations of sport fishing hatchery facilities, sport fishing stock enhancement, fisheries research and management, invasive species management, and habitat restoration. Section 2 Conforming amendment to reference new section. Section 3 Adds new section AS 16.05.340(l) which establishes the new sport fishing license surcharge fee schedule. Section 4 Effective date July 1, 2021. 9:30:41 AM Representative Carpenter stated his understanding that the bill would create a new sportfish hatchery fund. He asked if the department was concerned there could be constitutional issues associated with the creation of the fund. Commissioner Vincent-Lang replied that the department was not concerned. He elaborated that DFG had the subaccount established to repay the bonds. He stated that DFG did not see any constitutional issues with recreating the subaccount to deal with the hatchery maintenance. Representative Carpenter asked if the new fund would be dedicated to sportfish hatchery issues only. Commissioner Vincent-Lang answered in the affirmative. He explained that the Fish and Game Fund needed to be used to benefit the license fee holders. He explained that it was one of the state's few dedicated funds because it had been approved by the voters. He relayed that the funds would only be used to benefit hatcheries providing sportfishing including the Ruth Barnett and William Jack Hernandez hatcheries. Additionally, because the state-owned Crystal Lake hatchery was used for Southeast Alaska, the fund would be used to pay for its deferred maintenance as well. Representative Carpenter asked for the department's perspective on the $2.50 increase included in the governor's original legislation. Commissioner Vincent-Lang answered that the department supported the governor's legislation as written. He stated he would leave it to the committee and legislature to decide whether or not to add into the surcharge. He explained there was a call for additional funding for things the department could not currently provide such as invasive species management and other things that legislators in the House Fisheries Committee saw a need to provide a funding source for. Representative Carpenter asked why the funding had not been rolled into the normal ongoing maintenance. He asked why the need was being dealt with in a special way. Commissioner Vincent-Lang replied that DFG could probably deal with the hatchery maintenance costs with Fish and Game Fund revenue derived from license fees; however, the revenues were already spoken for in terms of how Dingle Johnson funds were matched. He explained that it meant the department would likely have to cut something else in order to pay for the maintenance. He relayed that DFG worked with user groups to try to find a way to deal with the deferred maintenance costs without asking for undesignated general funds (UGF). He reported the department had received general support for establishing a smaller surcharge. 9:33:54 AM Representative LeBon referred to Section 1 of the bill that referenced maintenance and operations of sportfishing hatchery facilities. He understood the need to maintain investments over time and had no problem with that. He asked how the money would be used for invasive species management and habitat restoration. Commissioner Vincent-Lang answered that the inclusion of invasive species management and habitat restoration had been added by the House Fisheries Committee. He believed the committee had an interest in dealing with invasive species. He explained there had been a bill in the committee to fund an invasive species council to look at the regulatory authorities the department had and may need to deal with invasive species. He elaborated that the committee saw HB 80 as an avenue towards providing some funding short of using UGF. In terms of other work on associated fisheries management and research, he believed the committee saw a need to evaluate the impact of stocking programs on wild stock. He stated it was some of the fisheries research the funding could be used for. He thought there was a desire by some legislators to look at ways of allowing access to stock fisheries through some type of non-boating access program. Representative LeBon asked Commissioner Vincent-Lang to elaborate on the definition of invasive species. He asked if invasive species were strictly living and breathing or if there were other examples. Commissioner Vincent-Lang answered that it was an ongoing question currently under debate. He elaborated that it had been relatively easy to define an invasive species as something that was not indigenous to the area; however, with climate change, species were moving naturally. He explained that the department was not concerned about a species that was not having deleterious effects. In terms of prioritization, DFG was looking at species moving into Alaska non-naturally that were having deleterious effects on species that were important economically or for subsistence purposes. Representative LeBon referred to invasive plants in Interior lakes that were not natural to Alaska. He explained that the plant was impacting the use of lakes, including fishing. He asked for comment from the commissioner. Commissioner Vincent-Lang answered that Representative LeBon was referring to Elodea, which was a concern and was a responsibility DFG shared with the Department of Natural Resources. He reported the state had several active Elodea programs, but the departments were struggling with finding ways to fund the programs into the future. He believed the House Fisheries Committee saw HB 80 as an opportunity to provide some funding for the programs. Representative LeBon asked if a portion of the funds raised as a result of the bill would be used for invasive species work. Commissioner Vincent-Lang answered that the $2.50 surcharge added by the House Fisheries Committee would go to a separate subaccount to be used for the specific purposes - including invasive species management - outlined in an amendment passed by the committee. 9:37:55 AM Representative Wool stated his understanding that in the past there had been a $9.00 surcharge to pay for a bond to build some hatcheries. He observed that the bond was paid off, but money was needed to maintain the hatcheries, which he imagined DFG had calculated when the hatcheries had been built. He looked at the resident sportfishing category and observed that at one point the surcharge had been reduced to $4.00 and increased to $6.50. He remarked that a $2.50 increase had been added by the House Fisheries Committee to help with invasive species. He asked if his statements were correct. Commissioner Vincent-Lang answered that the surcharge had ended when the bond had been paid off. The current question facing the department was how to pay for the long-term deferred maintenance on the 15 to 20-year-old hatcheries. The department had worked with user groups to identify a way to reduce the surcharge and have a fund to dip into to pay for the long-term deferred maintenance. He noted that the House Fisheries Committee had added an additional $2.50 to deal with other issues. Representative Wool observed that if another $2.50 were added [above the $2.50 added by the House Fisheries Committee] it would mean the residential sportfish surcharge would be back at $9.00. He noticed that the nonresident increase was $40 and $4.00 for residents. He noted that the $2.50 added by the House Fisheries Committee was applied equally to nonresident and residents. He believed it was a much larger percentage of residential sportfishing as opposed to nonresidential. He thought it seemed disproportionate. He asked for comments from the commissioner. Commissioner Vincent-Lang corrected an earlier statement by Representative Wool. He clarified that the resident surcharge used to be $9.00. The department had proposed a new surcharge of $4.00 and $2.50 had been added. He stated that the surcharge under the legislation was $6.50, not $9.00. He remarked that it was still a reduction. He confirmed that the House Fisheries Committee had added the $2.50 surcharge to all licenses regardless of the residency type. Representative Wool understood the surcharge as proposed was $6.50. He observed that if another $2.50 were added, the fee would be back up to $9.00. He speculated that since $2.50 had been added for invasive species, another $2.50 could ostensibly be added for another purpose. He remarked it appeared that a much larger percentage of the revenue was from nonresidents. He asked if nonresidents were consuming more of the hatchery sportfish. He remarked on Commissioner Vincent-Lang's earlier statement that about 80 percent of licensing revenue came from nonresidents. He pointed out that nonresidents were charged much more. He reasoned nonresidents did not account for 80 percent of the licenses, they were just charged much more. He asked if the department knew what percentage of a sport fishery was consumed by instate and out-of-state. Commissioner Vincent-Lang answered that he could follow up with the numbers. He relayed that in general terms most fishery resources were consumed by residents, but nonresidents paid the largest portion of the contribution to the Fish and Game Fund. 9:41:39 AM Representative Carpenter asked how much would be raised by the $2.50 increase [added by the House Fisheries Committee]. Commissioner Vincent-Lang replied that he would follow up with the information. Representative Carpenter thought it would be interesting to know what a $1 increase would generate as well. Commissioner Vincent-Lang replied that the department would follow up with the numbers. Representative Josephson highlighted the greater cost associated with out-of-state nonresident fees shown in spreadsheets in members' packets [note: one spreadsheet from DFG labeled "Surcharge Revenue Breakdown," updated April 4, 2021 (copy on file)]. He thought of HB 79 and observed that the interconnection appeared to be the question of whether a larger fee could have been imposed on freshwater and saltwater guides from out-of-state. Commissioner Vincent-Lang explained that DFG had tried to separate the issues. He elaborated that the saltwater logbook program had been used to collect data from saltwater charter boat fishing; therefore, DFG tried to keep the fee associated with the charter boat operators. He detailed that HB 80 was more general and supported hatchery programs benefitting residents and nonresidents throughout the state. He noted there were businesses impacted by the saltwater charter logbook program. The goal for HB 80 was to make the surcharge more generally placed across residents and nonresidents. He relayed that DFG had followed the structure from the original bond repayment in terms of what the department could collect from nonresidents versus residents according to a lawsuit that provided guidance. He added that most of the burden of the hatchery long-term maintenance would be placed on nonresidents. 9:44:19 AM Representative Josephson had spent a lot of time looking at the governor's vetoes in the past couple of years. He noted that DFG had suffered numerous vetoes to commercial fisheries appropriations, particularly in 2019. He asked if the surcharges were meant in any way to solve the problem caused by the vetoes. Commissioner Vincent-Lang replied in the negative. He explained that the bill was a way for DFG to look at funding long-term deferred maintenance, realizing that UGF funds were tight. The idea was to fund the cost with user fees, which the department had found to be generally acceptable when it had spoken to people. In terms of the logbook program [in HB 79], the department had obligations under two treaties and was trying its best to seek federal funds. The department understood that UGF funds were tight, and it had worked with the industry to find a way to self- fund the important work. He added that the industry understood the value of the work because the department had been able to relax salmon limits in Southeast and halibut limits in 3A and 2C that brought additional business to businesses hurt hard by COVID. HB 80 was HEARD and HELD in committee for further consideration. Co-Chair Merrick thanked the presenters. She reviewed the agenda for the afternoon. Representative Thompson asked Co-Chair Foster about some clarification on the when the budget committee substitute (CS) would be released. He wondered about the amendment timeline and asked if there would be a meeting on Saturday. Co-Chair Foster replied that the original intent had been to roll out the CS the previous day and give committee members two days to write amendments. He did not want to spring it on anyone. He had planned to take up amendments later in the week, but it had all changed while trying to figure out what to do with the American Rescue Plan Act (ARPA) money. He shared that the Legislative Finance Division had communicated they could get the committee a proposal later in the week outlining what the money could and could not be used for. He was hopeful the CS could be out the following week. He wanted to give members enough time to review the CS and have time to write amendments. Representative Thompson thanked Co-Chair Foster for the information. 9:48:28 AM Vice-Chair Ortiz asked about the potential of meeting the coming Saturday. Co-Chair Foster answered that he did not have any plans on meeting the coming Saturday. Co-Chair Merrick had no plans for meeting the coming Saturday. Co-Chair Merrick reviewed the agenda for the afternoon.