HOUSE FINANCE COMMITTEE January 19, 1998 3:03 P.M. TAPE HFC 98 - 1, Side 1 TAPE HFC 98 - 1, Side 2 CALL TO ORDER Co-Chair Gene Therriault called the House Finance Committee meeting to order at 3:03 p.m. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative Davies Representative Martin Representative Davis Representative Moses Representative Foster Representative Mulder Representative Grussendorf ALSO PRESENT Representative Rokeberg; Representative Jeannette James; Representative Bill Hudson; Representative Alan Austerman; Representative Kim Elton; Mike Greany, Director, Division of Legislative Finance; Barbara Belknap, Director, Alaska Seafood Marketing Institute; Dean Paddock, Juneau. SUMMARY HB 73 "An Act extending the termination dates of the salmon marketing programs of the Alaska Seafood Marketing Institute and the salmon marketing assessment; and providing for an effective date." HB 73 was REPORTED out of Committee with a "do pass" recommendation and with two fiscal impact notes, one by the Department of Commerce and Economic Development, and one by the Office of the Governor. HJR 2 Proposing an amendment to the Constitution of the State of Alaska relating to repeal of regulations by the legislature. HJR 2 was REPORTED out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Commerce and Economic Development. HOUSE BILL NO. 73 "An Act extending the termination dates of the salmon marketing programs of the Alaska Seafood Marketing Institute and the salmon marketing assessment; and providing for an effective date." REPRESENATIVE BILL HUDSON testified in support of HB 73. He noted that the legislation would extend the 1-percent domestic salmon marketing assessment, which would otherwise sunset on June 30, 1998. He observed that the industry has suffered from low returns and competition from farm salmon. He emphasized the importance of marketing. He observed that the amount and manner of collection would not be changed. Revenues from the tax assessment would be approximately $2.35 million dollars in FY 98. Representative Martin questioned if the industry should administer the program. He asked the amount of general fund dollars spent by the Department of Revenue to collect the tax. Representative Hudson noted that the buyer collects from the harvester. The Department of Revenue collects and accounts for the assessment. He observed that the law states that the Legislature may appropriate the funds back to the Alaska Seafood Marketing Institute (ASMI). He spoke in support of maintaining state collection of the assessment. He emphasized that the State of Alaska manages and oversees program quality and coordinates all aspects of the industry, including growth and development. Representative Martin reiterated that private enterprise "left to its own, would do the best for itself." Co-Chair Therriault observed that the tax is a designated receipt passed through to ASMI. He noted that there is no mechanism to force the private sector to join an association and pay dues. Representative Hudson clarified that there are no general fund dollars in the program. The tax is collected from the harvester and the processor. There is no general fund match. He observed that federal dollars were matched with processor fees. He noted that funding was taken from the domestic market and used as a state match for federal funding of the overseas program. In response to a question by Representative Kelly, Representative Hudson explained how taxes are distributed within ASMI. There are three sources of funds for ASMI. ASMI receives federal funds through the federal overseas marketing program in the Department of Agriculture. This amounts to approximately $3.4 million dollars, which is appropriated through the Legislative Budget and Audit Committee. These funds require a state match of approximately $500 hundred thousand dollars and can only be spent on overseas markets. Processors voted to initiate a self-assessment of three-tenths of a percent on every pound of fish purchased. The one-percent marketing tax was an effort to move into the domestic market when Norwegian farmed salmon began to usurp Alaskan product. Representative Kohring questioned if government is the appropriate vehicle to collect taxes. Representative Davis noted that the Department of Revenue administers the program. BARBARA BELKNAP, DIRECTOR, ALASKA SEAFOOD MARKETING INSTITUTE clarified that the Department of Revenue collects the assessment as part of the three-percent municipal fish tax. One-percent goes to ASMI and two-percent goes to the municipalities. Representative Hudson acknowledged that there is probably some cost to the Department of Revenue for the collection of the tax. He emphasized that the cost is minimal. MIKE GREANY, DIRECTOR, LEGISLATIVE FINANCE DIVISION clarified that the are no unrestricted direct general funds appropriated to match the federal funds. He explained that the assessments are not classified as part of the statutory designated funds. They remain general fund program receipts because of their status as a tax. All funds collected for the program are accounted for separately and reappropriated to the program. Co-Chair Therriault pointed out that the Department of Commerce and Economic Development's fiscal note should be corrected to reflect the assessment's status as general fund program receipts. Mr. Greany observed that the fish taxes were not included as designated program receipts. He explained that the Constitution (Article IX, Section 7) states that all proceeds from any state tax shall not be dedicated to any special purpose. These funds remain part of the state treasury. He noted that general fund program receipts go to the general fund, but are accounted for separately. He acknowledged that funds that are not considered part of the general fund are often perceived as dedicated funds. He observed that appropriations are divided into general funds or other funds. General fund program receipts are designated as "general funds". Designated program receipts are designated as "other funds". Representative Davies maintained that it is appropriate for these funds to be included in the "other funds" category. Representative Martin referred to "shared taxes". Mr. Greany clarified that the legislation does not pertain to shared taxes. DEAN PADDOCK, JUNEAU testified in support of the legislation. He observed that the State of Alaska serves as a pass through for the funds. He urged that the program remain a state collection. He asserted that the majority of fishermen will support the assessment as long as they are confident the funds will be used by ASMI. He stressed that the assessment benefits the entire State of Alaska. He maintained that tax collection is one of the legitimate functions of state government. REPRESENTATIVE ALAN AUSTERMAN spoke in support of the legislation. He stressed that the State receives revenues from the fish Alaskans sell on the open market, the more fish sold the more money the state makes. He noted that, in FY 96, the Raw Fish Tax amounted to over $7 million dollars. He stressed that fisheries business taxes, in FY 96, raised over $18 million dollars. He emphasized that revenues offset any cost to the Department of Revenue. REPRESENTATIVE KIM ELTON responded to questions raised by previous comments. He observed that the ASMI board has discussed privatization. He noted that former Governor Hickel requested that ASMI end their privatization effort at the time of the Bristol Bay salmon strike. He emphasized that ASMI is funded through industry dollars. He compared efforts of the tourism and fisheries industries to fund their effort. He observed that the Alaska Visitors Association (AVA) is still using state and local tax dollars. Representative Grussendorf MOVED to report HB 73 out of Committee with accompanying corrected fiscal notes. Co- Chair Therriault stated that the Department of Commerce and Economic Development's fiscal note would be corrected to reflect the proper fund source. HB 73 was REPORTED out of Committee with a "do pass" recommendation and with two fiscal impact notes, one by the Department of Commerce and Economic Development and one by the Department of Revenue. HOUSE JOINT RESOLUTION NO. 2 Proposing an amendment to the Constitution of the State of Alaska relating to repeal of regulations by the legislature. REPRESENTATIVE NORM ROKEBERG, SPONSOR, HJR 2 testified in support of HJR 2. He noted that the legislation proposes an amendment to Alaska's Constitution. He observed that the legislature has no method to deal with "rogue" regulations that do not meet the intent of statutes or are objectionable as a matter of public policy. He acknowledged that similar proposals have been defeated three times. He provided members of the Committee with the 1980 proposed constitutional amendment, as proposed by the legislature and the ballot question (copies on file). He stressed that the ballot question did not adequately reflect the resolution passed by the Legislature. In 1980 the Legislature passed legislation, which allowed the Legislature to bring a cause of action, after a request of the Lieutenant Governor, to change regulations. He acknowledged that previous attempts to allow the Legislature to annul regulation have failed but maintained that there has never been an organized effort to support this issue. He emphasized that there are a number of organizations that support the concept. He asserted that the legislation would right an imbalance in the balance of powers between the legislative and executive branches. He observed that the Constitutional Convention gave the executive branch an enormous amount of power. Representative Rokeberg noted that HJR 2 was amended in the House Judiciary Committee. "After finding that a regulation is inconsistent with its enabling statute," was added on page 1, lines 6 and 7. He recommended that this language be deleted and the original version of the bill be adopted. He maintained that the additional language would bind the hands of the legislature. REPRESENTATIVE JEANETTE JAMES, CO-SPONSOR, HJR 2 testified in support of the legislation. She echoed remarks by Representative Rokeberg. She noted the difficulty of deleting regulations. She observed that some regulations are not implemented. She stressed that a regulation can technically implement the chapter without working. She spoke in support of the original version of HJR 2. Representative Martin spoke in support of the legislation In response to comments by Representative Martin, Co-Chair Therriault clarified that the statutes allow an individual or the Legislature to challenge a regulation in Superior Court. Representative Davis asked if there is a constitutional question regarding the separation of powers. Representative Rokeberg clarified that the legislation would amend the Constitution. (Tape Change, HFC 98 - 1, Side 2) Representative James stressed that by not implementing regulations for legislation that has been passed, the executive branch can issue an "out of pocket veto." She emphasized that the executive branch cannot suppress legislation by not failing to implement regulations. She stressed the need for the Legislature to have more "clout". She asserted that the Legislature needs a "hammer". She acknowledged that a voluntary process is needed for the Legislature and the Administration to work together on regulations. She emphasized that the Legislature writes law and that regulations implement law. She noted that the obligation of the Legislature is to write the laws and that the obligation of the Administration is to administer the laws. She estimated that the Legislature would not have to use its clout often. Representative Davies stressed that the separation of powers is routed on the practicality of how much time the Legislature wants to spend on writing regulations. He suggested that the Legislature has enough to do dealing with policy issues. Implementation of the law is the process of writing regulations, and following the public hearing process. He did not think that the Legislature should be involved in this process. He pointed out that there is a regulation review committee. He suggested that the executive's ability to veto is an appropriate element in the balance of power. Representative Kelly stressed that after a regulation is repealed there would be a period of time before a new regulation could be implemented. Representative James noted that there is a 30-day period before a regulation can be implemented. Representative Kelly observed that it could take up to a year for a new regulation to be implemented. Representative Rokeberg emphasized that it is easier to pass a resolution than amend statute. He noted that the Governor can veto bills. He cannot veto a resolution. He stressed that it is easier to pass a resolution by simple majority than to overturn a veto. He added that resolutions could be used as guidance to correct problems in regulations. He observed that the regulation review process can be speeded up. He clarified that there is an emergency regulation process. He stated that the legislation provides a legislative veto. He observed that, according to the court, the Governor's veto is there to act as a check upon corrupt or hasty and ill considered legislation. He pointed out that there is no process to check a run amok bureaucracy. He maintained that a legislative veto would be a check upon corrupt or hasty and ill-considered regulations. Representative Kelly expressed concern that non-elected officials can create the force of law through regulations. He noted that, through the passage of HB 130, the Governor is ultimately responsible for regulations. Representative Davis noted that the state of Utah provides that regulations be reviewed every three years. He maintained that an automatic review brings awareness to any problems that exist in regulations. Corrections are made to prevent repeal of regulations. He spoke in support of the Legislation. Representative Grussendorf asserted that political or special interests have motivated most of the resolutions that he has seen. He maintained that resolutions do not receive adequate public hearings. He noted that the 1980 ballot amendment would have allowed regulations to be annulled by concurrent resolution. He noted that concurrent resolutions are easier to pass then joint resolutions. Representative Martin observed that the public gets upset with the legislature when regulations exceed the law. Representative Kohring expressed support for the legislation. He stated that his most common constituent concerns relate to regulations. He maintained that society is over regulated. Co-Chair Hanley MOVED to ADOPT HJR 2 as the version before the Committee. Representative Davies OBJECTED. Representative Davies stated that "we don't want the Legislature running amok." He spoke in support of the House Judiciary substitute. Co-Chair Therriault expressed concern that the Judiciary version opens the legislation to litigation. He questioned what would be required in regards to the finding. Representative Grussendorf spoke in support of CSHJR 2 (JUD). He noted that concerns are brought to the Administrative Regulation Review Committee. The Administrative Regulation Review Committee makes a statement of findings. He suggested that the Administrative Regulation Review Committee can provide findings. Co-Chair Therriault pointed out that a regulation could be consistent with statute but still overly burdensome. Representative Martin spoke against the inclusion of language requiring a finding. Representative Grussendorf suggested that the "where as" section would take the place of a finding. A roll call vote was taken on the motion to adopt HJR 2 as the version before the Committee. IN FAVOR: Davis, Foster, Kelly, Kohring, Martin, Therriault, Hanley OPPOSED: Davies, Grussendorf Representatives Moses and Mulder were absent from the vote. The MOTION PASSED (7-2). Representative Davies MOVED to ADOPT Amendment #1 (copy on file). Amendment # 1 would require adoption of the resolution by twenty-seven members of the House and fourteen members of the Senate. Representative Rokeberg spoke against the amendment. Representative Davis noted that it only takes a simple majority to pass a law. Representative Davies pointed out that a simple majority can pass a bill, but that it is subject to a veto. Co-Chair Therriault observed that the original policy by the Legislature would remain. A resolution would only serve to direct how the original policy should be implemented. A roll call vote was taken on the motion to adopt Amendment IN FAVOR: Davies, Grussendorf OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Therriault, Hanley Representatives Mulder and Moses were absent from the vote. The MOTION FAILED (2-7). Representative Kohring MOVED to report HJR 2 out of Committee with accompanying fiscal note. Representative Davies OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Davis, Foster, Kelly, Kohring, Martin, Therriault, Hanley OPPOSED: Davies, Grussendorf Representatives Mulder and Moses were absent from the vote. The MOTION PASSED (7-2). HJR 2 was REPORTED out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Commerce and Economic Development. ADJOURNMENT The meeting adjourned at 4:35 p.m. House Finance Committee 8 1/19/98