HB 247-SPORT FISHING ENHANCEMENT SURCHARGE  11:37:30 AM CHAIR STUTES announced that the final order of business would be HOUSE BILL NO. 247, "An Act relating to the fish and game fund; establishing the sport fishing enhancement surcharge; relating to the repeal of the sport fishing facility surcharge; providing for an effective date by amending the effective date of sec. 21, ch. 18, SLA 2016; and providing for an effective date." 11:38:34 AM DOUG VINCENT-LANG, Commissioner, Alaska Department of Fish & Game (ADF&G), presented HB 247 on behalf of the House Rules Committee, by request of the governor. He expressed that HB 247 was a priority for ADF&G in the current legislative session. He said that in 2005 the legislature had approved a bond measure to construct two sport fish hatcheries: the William Jack Hernandez Sport Fish Hatchery in Anchorage and the Ruth Burnett Sport Fish Hatchery in Fairbanks. He expressed that he is proud to have been personally involved in the design, construction, and financing of the bills which were passed and allowed the construction of the hatcheries. He expressed that in order to receive the bond, ADF&G crafted an unprecedented repayment plan; a surcharge was added to sport fishing licenses, all of which went directly to the repayment of the bond, less $500,000 annually for hatchery production in Southeast Alaska. He stated that the average collection from 2013 to 2018 was $6.4 million. Most of the surcharge was levied to nonresident anglers and no general funds were used for the repayment of the bond under this unprecedented strategy; the bonds would be paid for by sport anglers, the primary beneficiaries of the hatchery. COMMISSIONER VINCENT-LANG remarked that is important to note that $500,000 of the surcharge was dedicated annually to support sport fishing in Southeast Alaska; this was done recognizing that part of license fees would be collected from anglers only fishing in Southeast Alaska. He stated that this allowed hatchery production to be expanded in Southeast Alaska, which was critical given the status of its King salmon stocks. He remarked that significant sport fishing opportunities are provided through stocking efforts that are funded by the surcharge. He expressed that the plan has worked so well that ADF&G is paying the bond back five years early, in calendar year 2020. A promise was made at the inception of the bond that the surcharge would go away as soon as the bond was paid. As a result, the surcharge and all associated statutes will be repealed at the end of calendar year 2020. He said he had made that promise when he was part of drafting the bill. He stated that he realized what this funding source could do to maintain hatchery operations, but with the aforementioned promise in mind, he said that he is now proposing a compromise and a $5 reduction from what is currently being collected across the board; this leaves residents with a $4 surcharge and nonresidents contributing the "lion's share" at over six times what residents would be contributing [spreadsheet included in committee packet]. He remarked that this would be a 34 percent reduction now that the hatcheries are paid off. COMMISSIONER VINCENT-LANG said that ADF&G proposes to collect the additional surcharge in a separate account within the ADF&G fund to be accounted for and used only for the state's sport fish enhancement programs and sport fish hatchery facilities. Upon repayment of bond debt there is an immediate $500,000 funding impact to Southeast Alaska from the loss of the surcharge income, that currently funds the raising and releasing of over 1.4 million chinook salmon and smolt at release sights targeted to benefit sport anglers in Southeast Alaska's inside waters. He explained that losing this amount of funding, which supports existing enhancement activities, would be detrimental to Southeast Alaska's sport anglers. 11:42:32 AM COMMISSIONER VINCENT-LANG pointed out that sport fish enhancement programs release nearly 7.2 million fish in nearly 270 locations annually, in addition to the 1.4 million in Southeast Alaska. He stated that when the Ruth Burnett and William Jack Hernandez Hatcheries came online nearly $5 million in "DJ funds" had to be redirected in order to pay for their operation and maintenance. Any needed repairs and maintenance must come from existing operational budget funds and are usually done at the expense of other divisional needs. He added that there are other large expensive needs that were deferred during construction and have yet to be addressed. As these facilities age the maintenance needs will grow, which will put further undue burden on other existing programs. He expressed that the ability to tap into a source of funds to cover these needs would allow ADF&G to sustain enhanced production without impacting activities elsewhere. He said that there is an average of $6.4 million generated revenue from surcharge collections on sport fishing licenses; ADF&G currently allocates a little over $7 million to enhancement-related programs and projects across the division, with most tied to operation and maintenance of the two large facilities in Fairbanks and Anchorage. He summarized that establishing a new pared down enhancement surcharge would: cover existing costs allocated to enhancement programs, allow for the ability to reinstate old programs and projects, address deferred maintenance and equipment needs, ensure contingency funding is available for unforeseen events at these facilities without having to approach the legislature for a supplemental or shut down a facility, and allow the continuation of the important Southeast Alaska hatchery production. 11:44:29 AM CHAIR STUTES asked why ADF&G is decreasing the surcharge by $5, when every year the ADF&G's budget is reduced. She suggested that the $5 should be kept and added into the ADF&G's budget to be used for deferred maintenance. 11:45:20 AM COMMISSIONER VINCENT-LANG replied that when he was helping to put together the legislation to put the surcharge in place, he made a commitment that when the bonds were paid off the surcharge would go away. He expressed that he thinks it is important to follow through on commitments made early on, in order to assure people that a promise made regarding bond payments will at least be partially fulfilled moving forward. He stated that the goal with the proposed legislation is to strike a compromise that would allow for the continued operation of Southeast Alaska hatchery production and provide maintenance for the facilities, while still following through, to the extent possible, on reducing the surcharge amount based on the original commitment. CHAIR STUTES remarked that she appreciates Commissioner Vincent- Lang's desire to follow through on the original commitment but "times are changing," and with the funding for ADF&G being continually reduced, she thinks that it should be up to the legislative body to determine whether the surcharge should be lowered. She said that she would personally like to see this money stay within ADF&G and be utilized for management of fisheries. 11:47:04 AM REPRESENTATIVE TARR commented that she agreed with Representative Stutes' statement. She explained that the prices for licenses are already affordable; there wasn't any pushback from residents to adjustments that were recently made regarding surcharges under HB 137. She expressed that given how important fisheries are to all Alaskans, she would like to see that they have the resources necessary and she would be supportive of not lowering the fees. 11:47:52 AM REPRESENTATIVE VANCE asked whether the proposed changes to the fees would continue in perpetuity or have a sunset date. 11:48:15 AM COMMISSIONER VINCENT-LANG replied that the proposed fees would continue in perpetuity. REPRESENTATIVE VANCE asked, if the surcharges stayed as they currently are, whether ADF&G would have the discretion to use the funds in the department as needed, or they would stay in the Division of Sport Fish. COMMISSIONER VINCENT-LANG answered that the way the bill is constructed, any funds collected through the surcharge would go into a subaccount of the ADF&G fund which would be dedicated to maintaining and operating the hatcheries and allowing production in Southeast Alaska to continue. REPRESENTATIVE VANCE asked whether the proposed legislation would address all the hatcheries throughout Alaska or only those in Southeast Alaska. COMMISSIONER VINCENT-LANG replied that the proposed legislation would allow Southeast Alaska production to increase and, to the extent that ADF&G were to see needs for support in sport fisheries in other areas of the state, funding could be considered on a case by case basis. He emphasized that most of the funds would go to the operation and maintenance of the Ruth Burnett and William Jack Hernandez Hatcheries, which provide fish for much of Southcentral Alaska including the Railbelt and Kodiak. He explained that ADF&G saw this as an opportunity to work to provide more fishing opportunities for Southeast Alaska, as revenues were being collected from sport fishermen in those area. 11:50:07 AM REPRESENTATIVE KREISS-TOMKINS, referencing page 2 and 3 of HB 247, asked whether the resident/nonresident differential is required to operate within constitutional parameters. He referenced the Carlson case and said that interstate commerce, privileges, and immunities govern a lot of what the state can or cannot do regarding the ratio of resident to nonresident license rates. COMMISSIONER VINCENT-LANG answered that ADF&G had talked to the Alaska Department of Law (DOL) when it was originally putting the legislation together; DOL said that it would violate the law to have only a nonresident fee, but it was agreed that the percentage breakdown regarding residents and nonresidents under the existing surcharge was allowed. He stated the changes to the surcharge proposed under HB 247 would be steps down from the current surcharges, but he said that he thinks they would be permissible; however, he thinks it would not be permissible to have a surcharge on only nonresident licenses. REPRESENTATIVE KREISS-TOMKINS expressed that there is a big difference between having a nonresident fee and no fee for residents and having a set ratio between the two that the state is required to work within. He expressed that he would like to converse offline with Commissioner Vincent-Lang at a later point to discuss legal guidance on this topic. 11:52:37 AM CHAIR STUTES asked whether ADF&G could explain the Sectional Analysis for HB 247 [hardcopy included in the committee packet]. 11:53:19 AM RACHEL HANKE, Legislative Liaison, Office of the Commissioner, Alaska Department of Fish & Game, offered an explanation on the Sectional Analysis for HB 247. She pointed out that existing legislation created the enterprise account, which as Commissioner Vincent-Lang had stated collected surcharge revenue for the bond repayment. She explained that this would be amended under Section 1 of HB 247 to remove any bond language and create the subaccount in the ADF&G fund, which is the sport fishing enhancement account. It would also allocate the revenue to sport fishing facilities to be used only on enhancement programs and facility maintenance. She pointed out that Section 2 would amend AS 16.05.340(j) to reference the new enhancement surcharge for resident and nonresident sport fishing licenses. Section 3 would repeal a reference to AS 16.05.340(j), which would be kept in statute under the proposed legislation. She said that Section 4 would repeal Section 34, ch.18, SLA 2016 which would be amended to allow AS 16.05.130(e) and AS 16.05.340(j) to remain in statute beyond the sunset date. She pointed out that Section 5 is like Section 3 and makes a similar amendment to retain the reference to AS 16.05.340(j). Section 6 is the transition language stating that any funds remaining in the enterprise account after the bonds are satisfied will be transferred to the new sport fishing enhancement account. She said that Section 7 and Section 9 would give Section 1 and Section 2 an effective date of January 1, 2021. Section 8, like Section 3 and Section 5, would fix another reference to AS 16.05.340(j). The other remaining sections establish an immediate effective date. 11:55:09 AM REPRESENTATIVE VANCE asked, if the surcharges were kept at current levels to expand revenue, whether the proposed sport fish enhancement fund fees could be used towards paying for the modernization of the application ADF&G has in development. 11:55:55 AM MS. HANKE replied that her answer would be no, but she would like to have Deputy Director Tom Taube confirm this for the record. 11:56:09 AM REPRESENTATIVE VANCE remarked that she had spoken with ADF&G and she understands that one of the hopes for the application is that it will provide anglers with live access to information on what fish can be legally caught at a specific point in time. She clarified that that is why she asked whether the fees could be used towards application development, as it seems to her that it is an enhanced service for sport fishing; however, she expressed that she understands the legal restrictions on use of the funds. She summarized that she is hoping to understand the scope of what the options are for using the fund's fees. 11:57:09 AM TOM TAUBE, Deputy Director, Division of Sport Fish, Alaska Department of Fish & Game, replied that the way the proposed legislation is currently written the enhancement fund is related to hatchery production, and he did not think that would apply to application development. He expressed that some of the fisheries the application could provide access to would be hatchery fish, but he would have to ask one of the ADF&G's lawyers whether the language used in the proposed legislation would allow for fees to cover application cost development or anything outside of hatchery related expenditures. 11:57:59 AM CHAIR STUTES, after ascertaining that there were no further questions, announced that HB 247 would be held over for further review.