Legislature(2003 - 2004)
04/29/2004 08:44 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE CS FOR CS FOR SENATE BILL NO. 273(FSH) An Act amending the size, membership, and powers of the board of directors of the Alaska Seafood Marketing Institute and making a corresponding change in the quorum requirement; authorizing the establishment of the seafood marketing assessment at a rate of 0.5 percent or 0.6 percent of the value of seafood products produced; providing for an election to retain, terminate, or increase the seafood marketing assessment; providing for the repeal of the salmon marketing tax and provisions related to the salmon marketing tax; and providing for an effective date. Co-Chair Harris MOVED to ADOPT Work Draft Version G, 23- LS1366\G, Utermohle, dated 4-26-04, as the version before the Committee. There being NO OBJECTION, it was so ordered. SENATOR GARY STEVENS, SPONSOR, explained that SB 332 would expedite a process to begin in January 2005. On August 1, 2004 the director of the Division of Elections would approve the ballot [for the Board of Directors, Alaska Seafood Marketing Institute (ASMI)]. On September 1, ASMI would hold a meeting with the processors and fishermen. The ballot would be mailed, postmarked and returned to the Division of Elections to be certified by November 1. If the processors made the proposed choice, the tax on salmon fishermen would end on December 31 and the increased tax on processors would begin on January 1. The bill ensures that processors would be taxed during the full year and if there were fewer fishermen on the board, they would not pay the 1% tax. Co-Chair Harris thought that Section 2 and Section 3 appeared nearly identical. Senator Stevens referred to the chart showing the current tax structure (copy on file.) He pointed out that ASMI does the generic marketing for all seafood products. He mentioned the 1% tax on salmon fishermen, the 2% processors' assessment, and the current 25-member ASMI Board. The bill addresses both the size of the Board and stable funding for ASMI, and it presents three options to the processors. Senator Stevens asserted that the current 25-member ASMI board is unworkable. He pointed out in the far right column on the chart the option for the processors to eliminate their assessment and to end ASMI, with only the salmon tax continuing. The ballot would ask if any tax should be continued for ASMI. The second column of the chart would reduce the ASMI Board to 7 members, eliminate the tax on fishermen and raise the processors tax to .5% or $5 million. He asserted that this option would be the most effective way for ASMI to continue. The third column would raise the ASMI Board to 9 members by adding two more fishermen, and continue the taxes on salmon fishermen and on processors. Senator Stevens acknowledged that the bill is confusing because it provides options. The law requires 51% of the processors based on the volume of product, or the largest 7 or 8 processors, to make a change. In response to a comment by Co-Chair Harris, Senator Stevens remarked that a smaller board with more processors would mean that the processors would pay more into the industry. He said the processors are willing to pay the .5% and let the fishermen "off the hook." In response to a question by Co-Chair Harris, Senator Stevens answered that the federal funding appears stable. Co-Chair Harris asked if fishermen would prefer the second option of not paying a tax. Senator Stevens affirmed and noted that the structure of the board should change in that case. Representative Joule commented on small Alaska-owned shops. He thought that the ASMI Board would be controlled by out of state processors and questioned giving the marketing of seafood to non-Alaskans. Senator Stevens pointed out that seafood is an international industry, with a lot of marketing outside of Alaska. He commented that he was involved in ASMI in the 1970s when he was a processor. He thought that the board was more effective at that time because the decisions were made at the board level, and he expressed that CEOs, presidents and owners of processors are needed on the ASMI Board. TAPE HFC 04 - 101, Side B Senator Stevens continued, noting that all the larger companies and corporations deal in farmed fish. He reiterated that leadership from industry should be represented on the board. Representative Croft asked the current structure of the board. Senator Stevens replied that the 25-member board includes one person from outside of the industry, 12 fishermen and 12 processors. Representative Croft asked if the bill would change the composition to five processors and two fishermen. Senator Stevens affirmed. Representative Croft pointed out that under either scenario, a smaller board would be substantially or partially dominated by processors. Senator Stevens affirmed. Representative Croft wondered why permission is necessary to assess a processor tax. Senator Stevens replied that under current law, processors could make the choice of increasing the percentage, with the option not to fund ASMI. Representative Croft asked the rationale of changing to a board dominated by processors interested in the expansion of farmed fish and not motivated by Alaskan interests. Senator Stevens replied that ASMI would become less effective if it continued with the 1% fishermen's' tax and the .2% processors' tax. Alaska is no longer the primary supplier of salmon with most of the industry involved in farmed salmon. Representative Croft supported restructuring the board to a smaller number but wanted to see control over a resource Alaska owns. He didn't think ASMI could achieve the marketing of wild salmon by giving the marketing decisions to people with an inherent conflict of interest. He said that assessing the tax is one thing, but giving processors the power to choose how to market is another. Co-Chair Williams commented that the processors and the federal government pay into the marketing endeavor, and if the state were paying, restrictions could be placed on how the money is spent. Representative Croft argued that it is all state money. Co-Chair Williams replied that the processors could object. Representative Croft noted that it is a voluntary tax on processors. Co-Chair Williams said that it is "money out of the back pockets of processors." The fishermen have assessed themselves and have asked not to pay a tax. Senator Stevens pointed out that if 7 of the 8 processors could not be on the board because they have farmed fish product, the processors would not move to tax themselves higher. In current law the processors can decide taxation and this bill gives the option to go to .5% with more control of the board by the processors. He felt that it is reasonable as long as ASMI gets the marketing dollars to make the industry succeed. The tax level is not in this bill. Vice-Chair Meyer asked if the processors would pass on the tax to the fishermen if the fishermen don't pay any tax. Senator Stevens said that any tax on the industry impacts the ex-vessel price to fishermen. Vice-Chair Meyer noted that fishermen pay the price either indirectly or directly. Vice-Chair Meyer asked if any of the Dutch Harbor floating processors are Alaskan companies. Senator Stevens replied that Alaska couldn't tax the processors outside state waters unless they deliver a product inside state waters. Representative Joule asked if the 5 processors on the ASMI Board, as proposed in the bill, would be Alaskan. Senator Stevens replied at least one would be Alaskan, but currently most of the larger processors have offices in Seattle and elsewhere. Representative Croft asked if the bill allows fishermen to lower their own tax and to raise the processors' tax. Senator Stevens replied that it is similar to twelve regional marketing organizations with fishermen choosing to tax themselves and collect monies for regional marketing. Regional marketing is based on grants and lacks stable funding. He said that many fishermen would rather see money put into their own local organizations than into ASMI. Representative Croft asked if fishermen want any of the options in the bill. Senator Stevens replied that the United Fishermen of Alaska (UFA) supports eliminating the 1% salmon harvester tax as part of the ASMI funding formula. In response to a question by Representative Croft, Senator Stevens affirmed that the bill would involve a shift to big processors, stating that the board needs industry leaders. Representative Croft questioned shifting the tax and giving up control of the market when it all will work out in the value of the fish. Senator Stevens stated that it is a very indirect process. Representative Croft asked how the composition of the ASMI Board could represent the diversity of Alaskan fishermen with just 2 seats for fishermen. Senator Stevens replied that it would be unworkable for ASMI to represent every regional fishery and every species, and the Board should have members that represent and make marketing decisions to benefit the entire industry. He thought that a small group of 7 to 9 members would be more effective than a much larger group of 25 members. Representative Fate asked if the board would market wild Alaskan salmon at the expense of farmed salmon, which might represent the biggest margin of profit. Senator Stevens replied that Alaska now must deal with the international marketing structure that includes farmed fish. He said that Alaska must provide the highest quality product. The industry looks at what is most profitable, and farmed fish can compete fairly in the market. All product, including farmed salmon, is marketed through ASMI. MR. DONALD BREMNER, TLINGIT & HAIDA CENTRAL COUNCIL, and STAFF to SOUTHEAST ALASKA INTERTRIBAL FISH & WILDLIFE COMMISSION, commented that the proposed size reduction of the ASMI Board to 7 or 9 might make economic sense but it would be at the expense of rural representation by the smaller communities and smaller processors. He voiced that the Department of Fish & Game and ASMI have done a good job. The Central Council also opposes having representatives on the board who sell farmed salmon. He recommended a reduction to a 15-member board. In response to a question by Representative Joule, Mr. Bremner explained that the number of 7 or 9 was derived in looking at the issue of representation. Representative Joule asked if there were a number between 9 and 15 that would accommodate both of his concerns [rural representation and economics]. Mr. Bremner felt that there was basis for saying that rural Alaska's voice has not been heard when major decisions have been made. He felt that the quality and quantity of ASMI staff is also a key issue. He maintained that rural Alaska would not receive representation with the size of the board proposed in the Committee Substitute. SB 273 was heard and HELD in Committee for further consideration.