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." Co-Chair Merrick called the meeting back to order. The committee would take up HB 80. There were 3 amendments for the bill. 2:33:49 PM Vice-Chair Ortiz WITHDREW Amendment 1 (copy on file). Representative Carpenter WITHDREW Amendment 2 (copy on file). 2:34:28 PM Vice-Chair Ortiz MOVED to ADOPT Amendment 3 (copy on file): Page 1, line 8: Delete "shall allocate" Insert "may use" Delete the first occurrence of "to" Insert "only for" Page 1, line 10: Delete "to fisheries management," Insert "for sport fisheries management, sport" Page 1, lines 12 - 14: Delete all material and insert: "(2) of the remainder of each surcharge collected, (A) 30 percent to be deposited into a subaccount within the sport fishing enhancement account to be known as the Southeast sport fishing enhancement subaccount; money in the subaccount may be used only in the Southeast region of the state for sport fishing stock enhancement projects and the maintenance and operation of hatchery facilities; and (B) 70 percent for use in other regions of the state for sport fishing stock enhancement projects and the maintenance and operation of state hatchery facilities." Co-Chair Merrick OBJECTED for discussion. Vice-Chair Ortiz reviewed the amendment. He indicated that the amendment was a good faith effort to try to address the concerns raised by committee members and the commissioner. The amendment changed language in Section 1, line 8 of the bill from shall allocate with may use. The change was requested by the department and provided DFG more flexibility with account funds. He added that the next part of the amendment specified that funds generated by sport fish license sales would benefit sport fishery management and research. He elaborated that the final part of the amendment created a subaccount within the sport fish enhancement account that set aside 30 percent of the surcharge after the $2.50 was taken for invasive species management research and habitat restoration and would be deposited for use in the Southeast Region. The remaining amount would be available for other regions of the state. The provisions alleviated the concern DFG had regarding being prohibited from using the funding elsewhere. The legislature maintained the authority to change the distribution of the surcharge in the future. 2:36:13 PM Representative Wool asked if the charge was the additional $4.00 surcharge. He wondered if the allocation would inhibit DFGs traditional spending pattern of moving money to different regions as needed. 2:37:21 PM Vice-Chair Ortiz replied that the intent of the amendment changing the language was to afford more flexibility for the department. He deferred to the commissioner for further answer. Representative Wool asked if that was the reason for the choice of the word "may." Commissioner Vincent-Lang responded in the affirmative. He pointed to the following amendment language and the maintenance and operation of hatchery facilities; and state hatchery facilities" and informed the committee that DFG could only spend money for hatcheries that supported sport fisheries. 2:38:52 PM Representative LeBon referred to the bottom of the amendment where it referenced 30 percent deposited into the subaccount and concluded that it was targeted for the Southeast region and 70 percent was for other regions. He wondered if Fairbanks and Anchorage were the other regions. Commissioner Vincent-Lang responded in the affirmative. Representative LeBon inquired whether it was up to the commissioner to decide how the 70 percent was divided among hatcheries and it left 30 percent dedicated to Southeast, which was not subject to change. Commissioner Vincent-Lang interpreted the amendment to mean that 30 percent from the subaccount would be spent on Southeast Alaska. He communicated that currently, DFG spent roughly $860 thousand in Southeast Alaska between the existing surcharge and Pittman-Robertson (PR) and Dingell-Johnson (DJ) funds. The department would pay with the surcharge and would be able to build up enough over time to have funding to pay for the maintenance of the hatcheries that were producing the fish. Representative LeBon asked if the amendment should be 35 percent to the Anchorage Hatchery and 35 percent to the Fairbanks. Commissioner Vincent-Lang responded that he would like the language to remain as it was written reflecting 70 percent for Anchorage and Fairbanks. He noted that there were different maintenance and operational costs. He indicated that the 30 percent number was derived from the percentage of licenses purchased by Southeast residents from the total number of sport fishing licenses sold. He reported that the license holders in Southeast were not getting a direct benefit from the two hatcheries as those in Anchorage and Fairbanks. Representative LeBon thought the amendment was to protect the interests of Southeast. He clarified that the commissioner would allocate the remaining amount comingled from one pot between Anchorage and Fairbanks. Commissioner Vincent-Lang replied in the affirmative. Vice-Chair Ortiz spoke to the intent of the amendment. He recounted that the original fees that were charged for the licenses were set to repay bonds for construction of the two facilities in Anchorage and one in Fairbanks. He elucidated that the historical spending of the fees went mostly to the Fairbanks region. Since the bonds were repaid, the reasoning was to direct close to one third of the revenue to the region where one third of the license sales originated. 2:43:40 PM Representative LeBon asked about the commissioner's confidence level regrading the split. He wondered whether the 30 percent was locked into the Southeast Region. Commissioner Vincent-Lang replied that he interpreted the provision to allow the funding in the subaccount to be used in other areas if it was not needed in Southeast. He emphasized the use of the word may. Commissioner Vincent- Lang ascertained that currently DFG was spending about $800 thousand a year and 30 percent was $1.4 million per year. The remaining $400 thousand in the subaccount each year could grow and be directed towards the $2.5 million deferred maintenance need at Crystal Lake. The subaccount would be used to pay for maintenance of the infrastructure used to produce the fish. He believed that the percentage was the right amount and would address longer term deferred maintenance needs. 2:45:52 PM Representative LeBon voiced his concerns over the breakdown in the amendment. He noted the Fairbanks hatchery was in his district and the sport fishing interest of the Interior was supported by the hatchery. He wondered how he could protect the sport fishing interest of Interior Alaska also without dedicating a certain amount to the Fairbanks hatchery. Commissioner Vincent-Lang responded that Representative LeBon needed to rely on the commissioners assurances that DFG would maintain the hatchery and the infrastructure. He added that the Fairbanks hatchery was the most complicated in maintaining water quality and he was aware of the short and long term maintenance needs of the facility. Representative LeBon felt that there was a little bit of "Apples-to-Oranges." He reiterated that there was no dedication of funds to the two remaining regions. 2:47:54 PM Representative Johnson was attempting to envision how the split would work. She wondered whether the split would result in excess money in one fund that would be unable to be used for another region. Commissioner Vincent-Lang answered that the difference had to do with how fish was produced in Southeast Alaska versus the rest of the state. He explained that in the rest of the state two hatcheries were built and run by the department. In Southeast Alaska, the state did not build hatcheries. The hatcheries were run by private non-profit partners and received state funding to operate. He opined that the approach seemed to fit the Southeast region better. As a result of establishing a surcharge to build the two hatcheries in Anchorage and Fairbanks it left an understandable desire by Southeast legislators that their regions sport fishers were paying for something they were not getting a direct benefit. Therefore, the department apportioned part of the surcharge to use in Southeast Alaska. He pointed out that the methods used to benefit sport fishers were different and in Southeast Alaska it was accomplished via contract. The surcharge split was one way to ensure that each year all the surcharge funding was not allocated to Anchorage and Fairbanks leaving insufficient funding to maintain the contractual obligation to produce fish in Southeast. 2:50:33 PM Representative Carpenter asked how many hatcheries would be supported with the 30 percent portion. Commissioner Vincent-Lang responded that the funding was distributed on a case by case basis as to how the fish was produced at the private non-profit hatcheries. The department let the hatcheries decided where the facilities should be to produce the fish. The state paid the hatcheries to keep the production ongoing. Representative Carpenter understood the concept of fairly distributing the money. He thought there was other risks that should be considered. He wanted to know about the legality of splitting the money and the constitutionality of subaccounts in terms of dedicated funds. 2:52:14 PM AT EASE 2:55:39 PM RECONVENED Co-Chair Merrick indicated Mr. Bullard was online. Representative Carpenter had concerns and questions regarding the 30/70 allocation split, the creation of a subaccount and the legality of designated funds. Mr. Bullard responded that the amendment would create a dedicated subaccount within a dedicated account within a dedicated fund called the Fish and Game Fund. He explained that the fund was a constitutionally dedicated fund because it was required for participation in federal programs. The federal government did not require the state to further dedicate the revenue within the Fish and Game fund for particular purposes. He stated that both the account and the subaccount were unconstitutional, but the fund was constitutional. Representative Carpenter asked for clarity. Mr. Bullard reiterated that the original account and the subaccount within the fund were unconstitutional. Representative Josephson asked whether Mr. Bullard was stating that he drafted an unconstitutional amendment for Representative Ortiz. Mr. Bullard restated that it was his legal opinion that if the federal government did not require that the Fish and Game Fund have dedicated funds for purposes other than what the fund was designed for then the accounts were unconstitutional. Representative Josephson was aware that the fund was a dedicated fund because it predated statehood. Mr. Bullard responded that it was permissible because its existence was required by the federal government. Representative Josephson stated that the subaccount did not mean the money could not be distributed for different use by a future legislature. He believed that the state was compliant with the dedicated provision if the resources were used for fisheries. He asked whether he was correct. Commissioner Vincent-Lang interjected that when the DJ and PR funds were made available there was a requirement that license fees had to be used to match the funds. The Fish and Game Fund was a dedicated fund voted on by the people of Alaska and was an amendment to the constitution. The money in the fund was dedicated to DFG and could not be used for other purposes. 3:01:37 PM Representative Josephson recommended that the bill be held to revisit Mr. Bullards opinion. He needed more clarity regarding his statements. Vice-Chair Ortiz explained that rather than hold up the bill any longer he would withdraw the amendment and address the issue in the other body. Vice-Chair Ortiz WITHDREW Amendment 3. 3:02:34 PM Co-Chair Merrick WITHDREW her OBJECTION. Co-Chair Foster MOVED to report CSHB 80 (FSH) out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 80 (FSH) was REPORTED out of committee with a "do pass" recommendation and with one new fiscal impact note by the Department of Fish and Game. 3:04:32 PM AT EASE 3:07:22 PM RECONVENED Co-Chair Merrick reviewed the agenda for the following meeting.