SB 189-SPORT FISHING ENHANCEMENT SURCHARGE  3:55:00 PM CHAIR MICCICHE announced that the final order of business would be Senate Bill 189 (SB 189), "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." 3:55:13 PM DAVE RUTZ, Director, Division of Sport Fisheries, Alaska Department of Fish and Game (ADF&G), Palmer, Alaska, explained that the legislature approved a bond measure in 2005 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 detailed that ADF&G crafted a bond repayment plan that added a $9 sportfish license surcharge for residents and a bit higher surcharge for nonresidents. The surcharge goes directly to bond repayment, except for an annual $500,000 payment for hatchery production in Southeast Alaska. The surcharge plan has been so successful, ADF&G will be able to pay off the bond five years early. The final payment is scheduled for December 2020. He noted that the legislature made a promise initially that the surcharge would be eliminated after the final bond payment. The scheduled repeal of the surcharge and associated statutes is the end of 2020. 3:57:06 PM MR. RUTZ said the department remembers the promised repeal but also recognizes the benefit of the surcharge to sport fish enhancement operations. With that in mind, they propose a compromise to reduce the surcharge 34 percent so Alaska residents would pay $4 and nonresidents would contribute a little more. The department would collect the surcharge funds in a separate ADF&G account that would only be used for sport fish enhancement programs and sport fish hatchery facilities. He noted that upon repayment of the current bond, there is an immediate $500,000 funding loss to Southeast Alaska. Targeted sites in Southeast use the surcharge funds to raise and release 1.4 million chinook salmon smolt that mainly benefit Alaskan sport fish anglers. 3:58:34 PM MR. RUTZ detailed that the sport fishing enhancement program annually releases 7.2 million fish into 270 locations, most of which are lakes, and 1.4 million chinook salmon in Southeast Alaska. The enhancement efforts generate hundreds of thousands of sport fish angler days which in turn contributes significantly to local economies. The fishing efforts focused on enhanced chinook salmon in Southeast and Southcentral Alaska reduces the harvest of wild chinook salmon stocks that are currently in a state of recovery. MR. RUTZ noted that the department redirected nearly $5 million of Dingell-Johnson Act funds to pay for operations and maintenance after the Ruth Burnett and William Jack Hernandez hatcheries came on line. Any needed repairs and maintenance to date have come from existing operating budget funds at the expense of other division needs. Several larger and more expensive needs were deferred. Maintenance needs will grow and place undue burden on existing programs as facilities age. Having the ability to tap into a funding source will allow the department to cover sport fish enhancement without impacting other needs. 4:00:17 PM MR. RUTZ detailed that the surcharge generates an average of $6.4 million in revenue. The division allocates approximately $7 million to enhancement related programs and projects with most tied to the Anchorage and Fairbanks hatchery operations and maintenance. He summarized that establishing the new reduced enhancement surcharge would cover existing enhancement program costs, address deferred maintenance and maintenance needs, and ensure funds are available for unforeseen facility events to avoid supplemental budget requests or facility shutdown. 4:01:50 PM RACHEL HANKE, Legislative Liaison, Alaska Department of Fish and Game, Juneau, Alaska, provided the following sectional analysis for SB 189: Section 1 Amends AS 16.05.130(e) to name the newly created sub- account of the fish and fund the sport fishing enhancement account. This section also restricts the use of the sub-account to maintenance of sport fishing facilities as well as sport fish enhancement programs. This section also removes all language which references the enterprise account and the revenue bond. These amendments will go into effect January 1 the year following the bond being paid and closure of the enterprise account. Section 2 Amends AS 16.05.340(j) to reference the new enhancement surcharge and new funding purpose, it removes all language referencing the revenue bond, it also reduces all existing license surcharge amounts by $5. These amendments will go into effect January 1 the year following the bond being paid and closure of the enterprise account. Section 3 Repeals Section 21, ch. 18, SLA 2016. This section made a conforming amendment which removed reference to 16.05.340(j) because the section would have been repealed once the revenue bond is satisfied. Section 4 Removes AS 16.05.130(e) and AS 16.05.340(j) from Section 34, ch. 18, SLA 2016, which is the repealing section. This will retain the sections after the revenue bond has been satisfied and allow the amendments from sections 1 and 2 of this legislation to go into effect. Section 5 Amends uncodified law in Section 35, ch. 18, SLA 2016 to remove reference to Section 21, ch. 18, SLA 2016. This section effectively removed reference to AS 16.05.340(j) upon repayment of the revenue bond. This section will now be retained therefore, the repeal is removed. Section 6 Adds transition language to uncodified law which transfers the balance of the enterprise account to the new sport fishing enhancement account January 1 following the calendar year that the revenue bond obligation is satisfied. Section 7 Adds new conditional effect to uncodified law which states that sections 1 and 2 of this legislation will only go into effect once the commissioner of fish and game notifies the revisor of statutes that the principal amount of the bond and any other obligations of the bond have been paid. Section 8 Amends Section 36, ch. 18, SLA 2016 to remove reference to AS 16.05.340(j). Section 9 Effective date section which states that January 1 of the calendar year following the commissioner notifying the revisor of statutes as required in section 7, sections 1 and 2 of this legislation go into effect. Section 10 Establishes an immediate effective date for sections 3-10. CHAIR MICCICHE asked if the bill was clean enough to not compromise the dedicated fund issues. 4:04:16 PM CHERYL BROOKING, Assistant Attorney General, Civil Division, Natural Resources Section, Alaska Department of Law, Anchorage, Alaska, answered yes. She said the surcharge program currently has an established account for the bonds and the bill would continue the practice to some extent. CHAIR MICCICHE asked if she would do additional research and provide the committee with a more thorough answer. MS. BROOKING answered yes. SENATOR KIEHL asked for assurance that the proposal does not raise any legal concerns for the Department of Law. MS. BROOKING replied the bill does not trigger the Privileges and Immunities Clause that the Carlson v. State case impacted. The Privileges and Immunities Clause only applies to commercial operations and not sport fishing. The clause protects the ability of people to work and make a living in different states. Sport fishing fees for residents and nonresidents can be different. CHAIR MICCICHE asked what the definitions of enhancement and maintenance to make it clear what the expected activities from funding bill be. 4:06:23 PM TOM TAUBE, Deputy Director, Division of Sport Fisheries, Alaska Department of Fish and Game, Juneau, Alaska, specified that surcharge funding for enhancement and maintenance means supporting sport fish production at the Anchorage and Fairbanks hatcheries. Maintenance would include adding a backup well at the Fairbanks hatchery in addition to addressing corroded pipes, upgrading effluent system, and improving public access at the Anchorage hatchery. Maintenance would also encompass general wear and tear on hatchery equipment. CHAIR MICCICHE asked if there is a reason the bill does not specify maintenance funding associated to sport fishing facilities. MR. TAUBE answered that including enhancement would allow for fund dispersement to Southeast Alaska that currently occurs with the bond package. The intent is to maintain the $500,000 going to Southeast Alaska for king salmon production. 4:08:46 PM SENATOR COGHILL said Interior Alaska is grateful that the Fairbanks hatchery provides local king salmon. However, the legislature promised constituents that the surcharge would go away. He conceded that the operational and maintenance expectations for the hatcheries via the bond did not come in the way that people expected. SENATOR GIESSEL recalled that the Fairbanks hatchery struggled with finding a suitable water source. She imagined that a second backup well in Fairbanks is going to be an expensive endeavor. MR. TAUBE answered that a second well would cost approximately $1 million. High iron content in the water would require an elaborate water filtration system as well as heat exchangers to better grow fish. Both hatcheries have been functioning well, but the aging facilities require maintenance. 4:12:00 PM SENATOR GIESSEL commented that there is quite a backlog of deferred maintenance on buildings and other facilities. The State risks losing the hatchery facilities due to deferred maintenance and keeping the fund going seems prudent. SENATOR COGHILL explained that legislators always want to keep their promises. However, hatchery maintenance and enhancement to meet sport fishing expectations is a place that does not allow the legislature to keep a promise of not adding the surcharge into perpetuity. 4:13:13 PM CHAIR MICCICHE opened public testimony. He noted his appreciation that the fiscal note provided clarity for ongoing hatchery maintenance. He said he served on the board for the Cook Inlet Aquaculture Association and confirmed the importance of hatcheries and their requirement for maintenance. The fiscal noted clearly states on page 2 that funding provides ongoing hatchery maintenance. He admitted that he is more comfortable with the language in the fiscal note than in the bill. MR. TAUBE noted that the bill references the hatcheries as sport fishing facilities. CHAIR MICCICHE said he did not see anyone asking to testify. 4:15:23 PM SENATOR KIEHL referred to an estimated nonresident revenue report for one-day sport fishing licenses that showed the revenue going down 65 percent when the surcharge goes down 50 percent. He asked why estimated revenue goes from $1.2 million to $550,000 when the surcharge is reduced from $10 to $5. 4:17:00 PM BRIAN FRENETTE, Assistant Director, Division of Sport Fisheries, Alaska Department of Fish and Game, Juneau, Alaska, explained that the revenues are a function of license sales volume. He noted that there is a significant number of one-day nonresident sales, particularly in Southeast Alaska tied to the cruise ship industry, and that accounts for the big difference in revenue. SENATOR KIEHL pointed out that Southeast Alaska is expecting increased numbers of cruise ship passengers. He restated his question about the decreased revenue estimate for one-day nonresident license sales. CHAIR MICCICHE asked the division get back to the committee with an answer to Senator Kiehl's question regarding the decreased revenue estimate. MR. FRENETTE replied that he would clarify the one-day nonresident license purchase amount. 4:18:32 PM CHAIR MICCICHE announced that public testimony would remain open for SB 189. He said both SB 189 and SB 159 are simple bills, but the legislation may require a bit of clarity. He asked the departments to answer the questions that committee members posed. 4:19:23 PM CHAIR MICCICHE held SB 189 in committee.