Legislature(2003 - 2004)

04/29/2004 08:44 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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.                                                                                                                  

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