HB 80-SPT FSH HATCHERY FACIL ACCT; SURCHARGE  11:46:03 AM CHAIR STUTES announced that the final order of business would be 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." 11:46:17 AM CHAIR STUTES made introductory remarks on HB 80 on behalf of the prime sponsor [House Rules by request of the governor], noting that the bill is the Alaska Department of Fish & Game (ADF&G's) top legislative priority and had been introduced during the previous legislative session and was not passed due to COVID-19. She stated that, because the bill did not pass the previous session, the sport fishing hatchery surcharge had been allowed to sunset and millions of dollars of revenue was not collected by the department. She urged quick action by the committee. 11:47:07 AM DAVID RUTZ, Director, Division of Sport Fish, Alaska Department of Fish & Game, stated that HB 80 is a governor's bill that the Department supports, and it is one of the department's legislative priorities this session. He reviewed that in 2005 the legislature 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. In order to receive the bond, ADF&G crafted a repayment plan that was unprecedented. A surcharge was added to sport fishing licenses, nearly all of which went directly to repayment of the bond, less $500 thousand, which went to Southeast Alaska annually for hatchery production, since this area was not serviced by the two bonded hatcheries. He noted that fishermen paid the surcharge without much complaint. No general fund dollars were used to pay back the bonds; sport angler dollars matched by federal [Dingle-Johnson funds] paid the bill. The combined enhancement program that the surcharge funded contributes approximately $50 million to the economy of the state. 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 sunsetted on December 31, 2020. MR. RUTZ relayed that upon the repayment of bond debt, there was an immediate $500 thousand funding impact to Southeast Alaska from loss of the surcharge income, which funds the raising and releasing of over 1.4 million Chinook salmon and hundreds of thousands of coho salmon smolt at release sites targeted to benefit sport anglers in Southeast inside waters. He explained that losing this level of funding to support existing enhancement activities is detrimental to Southeast Alaska sport anglers and charter operators already highly impacted by the lack of out-of-state travelers due to COVID-19 travel restrictions. MR. RUTZ directed attention to a fact sheet included in the committee packet, which shows that the overall sport fish enhancement program releases nearly 7.2 million fish into nearly 270 locations statewide annually, which is in addition to the 1.4 million in Southeast and provides thousands of anglers with additional fishing opportunities, as well as provides a large economic boost to Southeast businesses. MR. RUTZ said that when the Ruth Burnett and William Jack Hernandez Sport Fish Hatcheries came online, nearly $5 million of Dingell-Johnson funds had to be redirected in order to pay for their operations and maintenance. Any needed repairs and maintenance to date have come from existing operating budget funds and usually have been done at the expense of other division needs. He said there have been several larger, more expensive needs that were deferred during construction and have yet to be addressed. He cautioned that as the facilities age, the maintenance needs will grow, which will likely put further undue burden onto existing programs. He advised that having the ability to tap into a source of funds to cover these needs would allow the division to sustain existing enhanced production without [negative] impacts elsewhere. 11:51:31 AM MR. RUTZ said that with these ongoing maintenance obligations and the loss of a substantial amount of revenue to support sport fish enhancement in Southeast Alaska, the department worked with groups across Alaska to propose a new plan to reinstate a reduced surcharge. The reduction to the previously collected $9 surcharge was $5 across the board. He explained that this left residents with a $4 surcharge and nonresidents contributing the lion's share, over 6 times what residents contribute. The proposed surcharge is a 60 percent reduction for residents and overall a 34 percent decrease from the original surcharge fee. He added that "this surcharge has been in place for about a decade and a half." He noted that a license fee breakdown was available in the committee packet. MR. RUTZ stated, "The department proposes again to collect that surcharge and deposit it into a separate subaccount within the fish and game fund to be accounted for and used only for the maintenance and operations of the state's sport fish hatcheries sport fish enhancement in Southeast Alaska." He said there was, on average, $6.4 million generated in revenue from surcharge collections on sport fish licenses. The reduction in surcharge would net the division approximately $4 million per calendar year. The division currently allocates $7 million to enhancement-related activity projects, with most tied to the operation and maintenance of the 2 large facilities in Fairbanks and Anchorage. MR. RUTZ concluded his remarks by stating that the establishment of this new reduced enhancement surcharge would cover most of the existing costs allocated toward the enhancement programs. Further, it would address deferred equipment and maintenance needs and ensure contingency funds are available for unforeseen events at these facilities without having to request supplemental funds from the legislature or, worst case, shut down the facilities. He noted that this legislation, through a previous bill, had been introduced in 2019, to be heard during the Thirty-First Alaska State Legislature, but with the pandemic in full swing unfortunately was not meant to be. 11:55:50 AM CHAIR STUTES stated that the surcharge had been in existence for some time prior to the sunset, and the department is currently requesting only a portion of the surcharge be reinstated. She postulated that if the entire surcharge were to be reinstated, then the department would collect an estimated $2 million in additional revenue than the current proposed legislation would provide. She added that the department has well-known budget shortages, and that 82 percent of the revenue is collected from nonresident anglers. She asked the department to explain why only a portion of the surcharge is requested to be reinstated. MR. RUTZ explained that in 2005, the department had conveyed its intention that the surcharge would be eliminated once the bonds had been fully repaid. He stated his intention on behalf of the department that it should not appear [to the industry] to be greedy. 11:57:51 AM CHAIR STUTES stated that things have changed since 2005 and, during the previous legislative session, the proposed legislation had been amended to include additional surcharge to be collected. She expressed her concern that HB 80 does not request sufficient revenue to cover the program. 11:58:41 AM REPRESENTATIVE MCCABE stated his support for the hatchery program and requested that the department provide a cost breakdown by facility for deferred maintenance that had been referred to in testimony. 11:59:50 AM MR. RUTZ directed attention to a cost breakdown included in the committee packet. He estimated that $5 million of sportfish funds had been spent on the program, with $3.4 million for the William Jack Hatchery and $2 million for the Ruth Barnett Hatchery. He stated that cost overruns during the construction of the hatcheries had resulted in incomplete construction and deferred costs. He gave examples of maintenance items that included wells, disinfection units for production modules, new trucks, and completion of visitor center facilities. 12:01:56 PM CHAIR STUTES pointed out that the committee packet contained itemized costs for projects and requested the department provide a cost estimate breakdown by facility. MR. RUTZ agreed to provide the requested information to the committee. 12:02:38 PM REPRESENTATIVE STORY asked for the department to provide a formula or revenue analysis depicting how the surcharge revenue proposed would be allocated according to the facility cost breakdown that the department had agreed to provide. She asked for the department to also provide a breakdown of economic development and impact to the state from the hatchery program. 12:03:16 PM CHAIR STUTES stated her intention to offer a future committee substitute to HB 80. CHAIR STUTES announced HB 80 was held over.