HB 112-REPEAL CFEC; TRANSFER FUNCTIONS TO ADFG  2:27:22 PM CO-CHAIR TALERICO announced that the final order of business is HOUSE BILL NO. 112, "An Act repealing the Alaska Commercial Fisheries Entry Commission and transferring its duties to a commercial fisheries entry division established in the Department of Fish and Game and the office of administrative hearings; and providing for an effective date." [Before the committee was CSHB 112(FSH).] CO-CHAIR NAGEAK moved to adopt the proposed committee substitute (CS) for HB 112, Version 29-LS0485\N, Bullard, 3/2/16, as the working document. REPRESENTATIVE TARR objected for discussion purposes. REPRESENTATIVE LOUISE STUTES, Alaska State Legislature, spoke as the sponsor of HB 112. She explained that Version N is in response to Governor Walker's Administrative Order (AO) 279, which moves the administrative and research functions of the Alaska Commercial Fisheries Entry Commission (CFEC) to the Alaska Department of Fish & Game (ADF&G). Version N defines executive compensation for the three CFEC commissioners and compensation for CFEC employees that are moved from an exempt to a classified service. Staff salaries would take effect immediately and commissioner salaries would take effect on January 1, 2017. She deferred to her aide, Mr. Reid Harris, to elaborate further on the bill. REID HARRIS, Staff, Representative Louise Stutes, Alaska State Legislature, reiterated that [Version N] is in response to Administrative Order 279. The prior version of HB 112 did much of what AO 279 accomplished and therefore the bill went down from about 58 pages to one and a half pages. Version N defines executive compensation for the CFEC commissioners, setting them at Range 27A, and changes the commissioners from being on a monthly rate to a daily, much like what is done for the Board of Fisheries and Board of Game. Version N also provides that CFEC employees who were transferred from exempt to classified service under ADF&G will remain at the same rate of pay. Sections 3 and 4 of Version N are the effective dates. 2:31:26 PM REPRESENTATIVE SEATON asked whether the bill has any provisions that are not consistent with the recommendations of the legislative audit that was performed. MR. HARRIS responded that the bill is drafted to the recommendations of the audit. The audit recommended that over a three-year period the commissioners go to less than 15 hours a week without benefits. The sponsor felt, however, that due to the administrative order being such a shock to the commission it would be unfair to ask them to go to less than 15 hours a week in such a short timeframe and would not give the commission time to get its house in order. So, the bill adjusts their pay rate from a monthly to a daily rate and at a future date it would be a good idea for this body to revisit this and consider putting different stipulations on the hours of the commissioners' work. 2:32:49 PM REPRESENTATIVE TARR removed her objection. There being no further objection, Version N was before the committee. 2:32:55 PM CO-CHAIR TALERICO opened public testimony. MARTIN LUNDE, Southeast Alaska Seiners Association, stated that his association is opposed to anything in HB 112 because it would help to implement Administrative Order 279, which the association has severe difficulties with. If done at all, this should have been done with an executive order rather than an administrative order. The association cannot in good conscience support anything that is implementing Administrative Order 279, which is specifically addressed in Version N. Additionally, the association has questions about the financial implications of moving [staff] from exempt to classified and what the long-term fiscal impacts of that would be. He assumed it would mean higher rates of overtime pay during licensing and research functions at the time when fishermen need to have their gear in the water, because if there are difficulties during that time there would be higher costs associated with that. Fundamentally it is frustration over the administrative order and further implementing it. 2:35:32 PM REPRESENTATIVE TARR noted the audit results have been under consideration for some time now. She asked how Mr. Lunde's organization would have addressed the audit results to provide a solution had Administrative Order 279 not been put in place. The conversation had been that a bill would be forthcoming and that there would be some changes. She asked what could have been done that would have been more in line with what the Southeast Alaska Seiners Association might have been expecting. MR. LUNDE replied that there certainly was room for streamlining within the agency, which he believes the agency was already doing. At issue is that the CFEC is funded entirely by commercial fishing fees. The [fishing industry] pays its own way, it brings in roughly $7 million and it is roughly $4 million to operate. [Fishermen] get really nervous when there are elements about that put into danger $1.2 billion worth of permit values and limited entry itself. Commercial fishing men and women in Alaska have invested heavily in permits and their boats; these are small businesses. Streamlining government is always a good thing, but [fishermen] get really nervous when too much is taken away from something that they are paying for. [His association] likes the idea of having competent folks at the CFEC full time and ready to address the issues that come up. It is like firemen - they are paid to be there just in case even though they are not always out there fighting fires. There are always waves of heavier business times and there are times where there is going to be some potential buybacks in different fisheries throughout the state and times in the not-too-distant future of limiting some fisheries out west. Those are the things for which the association would like to have a strong, capable Commercial Fisheries Entry Commission and having three commissioners there to do the job. 2:38:19 PM REPRESENTATIVE JOSEPHSON understood the audit recommended the CFEC not be subsumed into ADF&G. He posited that there would still, under the bill, be a CFEC. MR. LUNDE agreed. REPRESENTATIVE JOSEPHSON inquired whether the fees that Mr. Lunde talked about would still be collected and, if so, what would be done with them. MR. LUNDE answered he is not entirely sure what is going on. His organization has asked many questions of ADF&G, but has had a difficult time getting any answers. REPRESENTATIVE JOSEPHSON asked what the difference is between an administrative order versus an executive order, as seen by Mr. Lunde's organization. MR. LUNDE replied that his organization did not want to see any of this done in the first place. However, there are steps the legislature can take to reject an executive order and that would be through a simple majority vote in a joint session, which is why an administrative order was probably done. Also, according to Legislative Legal and Research Services, Administrative Order 279 goes beyond the parameters of an administrative order. 2:41:23 PM REPRESENTATIVE TARR understood the preference is that none of this would be happening. But, given the administrative order is now in place, she inquired whether some of the bill's provisions would help improve the circumstances relative to what was put in place with the administrative order. MR. LUNDE responded that he does not honestly think so, especially in light of where things may go with an hourly rate for the commissioners. The bill is really looking to just trim in the commissioners and that is not something his organization would like. His organization wants a strong, capable, fully staffed Commercial Fisheries Entry Commission as it exists now with all three commissioners. 2:43:04 PM ROBERT THORSTENSON, Executive Director and Lobbyist, Southeast Alaska Seiners Association, and lobbyist for Kenai Peninsula Fishermen's Association, Alaska Bering Sea Crabbers, Armstrong- Keta, Inc., and Alaska Pacific Environmental Services, LLC, stated he has talked to everyone he works for in the fishing industry. He related that he has told the commissioner that "we would back off on our position opposing this CFEC orders and these bills that have come flying at us the last couple years if they could come up with one permit holder, one single permit holder, and I have yet to find anybody ... of one of the 11,000 permit holders who hold $1.2 billion worth of permits." This is a special agency, it is not just some agency that is holding some general funds (GF), and it is an agency that is funded by his members. His members pay $700,000 a year in fees and do not mind paying larger fees because they know the general fund has been short on overall fish and game management. While his members love ADF&G, ADF&G houses personal use, sport, wildlife viewing, charter, commercial, and hunting, so it has a lot of different functions. He reported that former state legislator Clem Tillion has urged that the CFEC not be merged into ADF&G, because the CFEC needs to be separate. There may still be a couple of commissioners and one secretary remaining and no research or other functions. MR. THORSTENSON pointed out that recently the harvest in state waters in the Bering Sea went from 0 to 36 million pounds of cod and the fishery is going to get closed three weeks early this year. It will probably be at a level of 50-100 million pounds within the next couple years of a new state waters fishery. Fishing will be expanding into areas that are going to be really hard to deal with. The weakening of CFEC by sliding it over to ADF&G "is going to hamper us in all of our abilities for all of our new state waters fisheries; we've got hundreds of boats in state water fisheries in the gulf that have not been put under a system yet." This system is a special system, it is a special agency. There is not another one like it in the world. Every other state that has limited entry, every other state that has some type of a management plan, does not have the same type of constitution that Alaska has. That fragile, constitutionally protected privilege of Alaskans to commercially harvest salmon is threatened by AO 279 and goes far, far deeper and further and far more destructive than the audit itself was. MR. THORSTENSON charged that to add credence to an administrative order that literally plucked a bill out of this body and moved it over to the governor's office without any public discourse when the entire board of United Fishermen of Alaska was in town, if that is the way that this body decides to conduct business with the rest of the industries in the state, bar the doors. This is a huge mistake, this bill was a mistake in the first place. While he appreciates the intent of cutting the budget, there are some places where the cutting is too deep and is putting at risk a huge system with the state's largest employer. Currently the fishing industry is putting in about as much tax as any other industry in the state. 2:47:18 PM REPRESENTATIVE TARR addressed Mr. Thorstenson's statement that ADF&G has many other duties besides commercial fishing. She asked if Mr. Thorstenson's concern is that once the positions are transferred to ADF&G they may then be diluted by having to do other work or would somehow be influenced by the overall department direction that could be in conflict with what would otherwise have happened. MR. THORSTENSON answered that maybe the intent here is to unionize more state employees. What has made the CFEC a special commission, a stand-apart commission, is that it is sitting on a $1.2 billion existing permit bank. The members that he has in Southeast Alaska are 30 percent Sealaska shareholders and they own permits that fluctuate between $200,000 and $300,000 apiece. Many Native Alaskans need an attorney just to look after their own business, their own permit, and their own boat because it is worth more than any other asset they have. They see their fees paying two or three commissioners, who are extremely sharp attorneys, to make sure this system stays afloat, because this is the most tenuous, very carefully constitutionally balanced system of its kind in the world. United Fishermen of Alaska voted against this 33-0. Out of 11,000 Alaskan permit holders he has yet to find one single permit holder who supports AO 279 or any version of any of these CFEC bills. 2:49:45 PM BEN BROWN, Commissioner, Commercial Fisheries Entry Commission (CFEC), said Version N of HB 112 is vastly simpler than the bill as introduced. The debate that has started to happen does not really address the four corners of this version of the bill. The larger picture is that last year "we were gravely concerned with what HB 112 would have done in its original form." During the interim the audit results were released and the big takeaway from the audit was that CFEC should continue to operate as an independent regulatory quasi-judicial agency. The audit also said that several of the CFEC's administrative functions could be transferred over to ADF&G and the CFEC did not contest that, but one point made on page 13 of the audit is that maintaining CFEC's organizational structure allows the agency to expand as necessary without changing statutes or regulations. The audit also recommends that [the commissioners] be reduced to 15 hours a week. While he respects the good and thorough job done by the legislative audit, he sees an internal inconsistency in those two recommendations. MR. BROWN thanked Representative Stutes, noting that it is a conundrum on how to proceed, but Version N of HB 112 threads that needle quite well. Version N takes the commissioners to an hourly rate of compensation, which is by definition scalable; when the work is there the work can be done. Regarding Mr. Lunde's reference to upcoming buybacks and certainly a future limitation, he said that if a hard cap of two days a week at 7.5 hours is put into statute and then a limitation goes forward, a backlog of work for the commissioners would immediately be created. One of the three seats is vacant and there is no indication from the governor's office at what point that third commissioner's seat will be filled. He said he and CFEC commissioner Bruce Twomley can support Version N because it just deals with a very specific thing, which is the amount of work the commissioners are able to do in a manner that is consistent with the audit's recommendations. MR. BROWN addressed Section 2 of Version N, saying he does not know what the practical end result of AO 279 is going to be. He said communication has been attempted with the commissioner and deputy commissioner of ADF&G and also some folks at the Department of Law to give [the CFEC] clarification about what the practical effects of the administrative order will be. The clutch of documents that Mr. Harris gave to the committee will provide some more information but will probably create more questions than provide answers. Therefore, he does not know that it is practical if Representative Stutes wants to move forward with her bill trying to solve one specific targeted element of the problem to try to find an answer to the larger debate, because he does not think that is going to happen today or this week. So, the CFEC commissioners can support Version N and can talk about the audit and AO 279 or the larger more complicated things, but he does not know that that is necessary for the committee to decide to move forward with Version N. 2:53:28 PM REPRESENTATIVE TARR observed that Version N would provide for Range 27 and surmised the idea is a daily rate similar to other boards, which, she calculated, could be a pay cut of 50 percent or more for an individual commissioner. She inquired whether [a commissioner] would have to find other work to supplement his/her income and asked how would a commissioner shuffle the deck to become available on a full-time basis when work is available or when there is an emergency situation. MR. BROWN first pointed to what he thinks is an error on page 1, line 8, of Version N, stating he thinks "[A]" should be "[a]". He then replied to Representative Tarr's question about how this would work, saying that there are other examples of this such as the Board of Fisheries and the Alaska Public Offices Commission (APOC). He related the experience of a friend who was appointed to APOC and discovered the great deal of work involved and juggling that with her other affairs as an attorney. He said APOC is a good example of a feast or famine kind of workload. Going forward the governor would have to have to have his boards and commissions people carefully look at whom they were going to appoint to these seats knowing that an appointee could find himself/herself having to work a full-time-plus job in the event of a really thorny limitation that just produced an onslaught of applications for permits. It could not be promised to someone that there was going to be stability over the course of a four- year term. That said, there are going to be people who are interested in this work and who do not have a vested interest in any commercial business, given that prohibition still remains in the statute. It would become a personnel matter for future governors to determine who had the right skill set and also the right availability of time to be able to function for a full four-year term in this newly configured model. He said he met with several of the committee's members last year, as well as members of the other body, in anticipation of the hearing on this bill when it was doing a great deal more. In many of those conversations he suggested going to some sort of part-time model. So, that is one reason he is in a position to be able to support this, but it is not going to be one size fits all. 2:57:10 PM JERRY MCCUNE, President, United Fishermen of Alaska (UFA), offered his understanding that an administrative order cannot contain statute, while licensing is in statute. So, it is being ordered to move the statute people over to ADF&G, which, he understood, cannot be done under an administrative order, it must be an executive order. Also of concern to UFA is that the ADF&G commissioner sits on the [North Pacific Fisheries Management Council]. Other fisheries are being developed in the Bering Sea and part of these fisheries will be under the council because of the quotas. Thus, there will be a big conflict for the commissioner of ADF&G to make that decision and also do the licensing and everything else under CFEC, especially if it becomes limited. Right now a transfer of a permit, if it is objected to, would have to go from ADF&G over to CFEC and then back. So, there are two agencies, with one that is specialty law, which will have to be relied upon to make some of these decisions. The same thing can be accomplished by leaving the CFEC where it is and still result in the savings talked about by the audit. The CFEC has already been cut $650,000 and six staff people and that will provide more profit to the state, plus $1.3 million is generally given to ADF&G. Everything can be accomplished that was said by the audit and still keep the CFEC a separate agency to run the limited entry law under the constitution and also keep the CFEC separate out of politics. Throwing the CFEC into the arena of ADF&G will be a big conflict if there is a limited entry fishery, such as a Bering Sea cod fishery that will involve quotas. 2:59:45 PM REPRESENTATIVE TARR remarked that there seems to be a lot of confusion about AO 279 and it is unclear how it will be implemented. She asked whether the specific provision in Section 1 of Version N to move the CFEC commissioners to a part- time position is acceptable to UFA. MR. MCCUNE replied that UFA is amenable to making CFEC stay where it is at and be more efficient, whether that is with one part-time and one full-time commissioner or three part-time commissioners, whatever works for CFEC's workload in the future. 3:00:50 PM CO-CHAIR TALERICO closed public testimony. REPRESENTATIVE SEATON said he is that first permit holder [mentioned in Mr. Thorstenson's testimony] because he introduced a bill to change CFEC in the previous legislature and there are other permit holders he has talked to that knew the CFEC was a very inefficient agency. As he sees it, the bill before the committee would ensure that there is a transfer of personnel in a way in which they can reasonably work on their daily schedules instead of having full-time commissioners with not having full- time duties to do. The committee heard from one of the commissioners that this is a reasonable way because when there is more work the commissioners can flex up for the workload. Also, the bill provides some protection for individuals transferring from one place to another. If there are legal questions on what an administrative order can do, he is sure those will get solved as they cannot be solved here. He does not see it as a constitutional problem. He said he supports this bill as a reasonable way of adjusting the work load to the timeframe of what the CFEC commissioners will be doing and it follows the recommendations of the legislative audit. 3:03:12 PM CO-CHAIR TALERICO re-opened public testimony. STEVEN SAMUELSON stated he fully agrees with the testimony he has heard today. In his opinion, what is happening with the CFEC has been in the works since his grandfather and so many people have paid into the system and worked to have that CFEC work on their behalf. He is concerned that mixing the CFEC with ADF&G goes against what so many have worked for. His largest concern is that the CFEC will get lost in the transition and will become absorbed somehow within ADF&G so that it is not seen. He therefore feels that HB 112 is premature. There is also much concern with some of the other legislation coming through and those will affect this directly and he wants to see what will happen with that before changing the CFEC. The CFEC knows the fishermen, their names, families, and boats. Regarding the $1.3 billion in the industry, he said this is very true under the permits, but it is not a huge group of people. Many fishermen are just that - they own a permit and a boat and they are floating around on their retirement. They need the organizations to represent them, although he is here representing himself as someone working in the industry. He reiterated that HB 112 is premature. CO-CHAIR TALERICO closed public testimony after ascertaining no one else wished to testify. 3:06:34 PM CO-CHAIR TALERICO offered his appreciation to the testifiers who mentioned Administrative Order 279. He said he had no knowledge that the administrative order was coming forward and that for all intents and purposes it removed the original bill that was before the committee. He posited that Representative Stutes is trying to address policy and, while the end result is not known, if something changes with the administrative order there would at least be some type of policy in place if the AO continues forward, regardless of the committee's support or opposition to that particular administrative order. CO-CHAIR TALERICO, in response to Representative Olson, said he will be holding over HB 112. REPRESENTATIVE JOHNSON said he would like to understand the relationship between HB 112 and Administrative Order 279 and what would happen if the bill becomes law and the administrative order is overturned. He requested that someone from Legislative Legal and Research Services address the committee at its next meeting on the bill in this regard. CO-CHAIR TALERICO noted he sees the sponsor giving confirmation to the request. REPRESENTATIVE OLSON also requested the committee be addressed by someone from the governor's office regarding the rationale. 3:09:28 PM CO-CHAIR TALERICO held over HB 112.