Legislature(2015 - 2016)CAPITOL 120

02/23/2016 10:00 AM House FISHERIES

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Audio Topic
10:02:08 AM Start
10:03:03 AM HB251
10:59:31 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
        HB 251-ELECTRONIC TAX RETURNS & FISHERIES TAXES                                                                     
10:03:03 AM                                                                                                                   
CHAIR STUTES announced  that the only order of  business would be                                                               
HOUSE BILL NO.  251, "An Act requiring  the electronic submission                                                               
of  a  tax return  or  report  with  the Department  of  Revenue;                                                               
relating to  fisheries business tax and  fishery resource landing                                                               
tax; relating to refunds to  local governments; and providing for                                                               
an effective date."                                                                                                             
CHAIR STUTES opened public testimony.                                                                                           
10:03:43 AM                                                                                                                   
RICHIE  DAVIS,  Representative,  Seafood  Producers  Cooperative,                                                               
provided a brief history of  the Sitka based organization, as the                                                               
largest and oldest  cooperative of its type in  North America. In                                                               
FY 15, the association's 650  members paid approximately $800,000                                                               
into the  state's general fund,  via the fisheries  business tax.                                                               
He called  for visibility of the  states over all plan,  to solve                                                               
the  budget gap,  in order  to identify  where the  fisheries tax                                                               
contribution  ranks.    The  debt   will  not  be  solved  by  an                                                               
additional fisheries business  tax, he opined, nor  could all the                                                               
combined resource extractions of  the state provide the necessary                                                               
revenue  required  to bridge  the  fiscal  gap.   The  1  percent                                                               
proposed  tax represents  a significant  amount to  the fisherman                                                               
but  is  insignificant  when considering  Alaska's  total  budget                                                               
shortfall.    He  agreed  that  fishermen  play  a  role  in  the                                                               
shortfall equation, but that role has  not yet been made clear to                                                               
the organization.  The proposed  cuts to the Alaska Department of                                                               
Fish  &  Game  (ADF&G)  compound   the  issue.    The  management                                                               
principles provided by the agency  are integral to preserving the                                                               
sustained yield  fishing industry that  is a shining star  in the                                                               
global  market.   He stressed  that adding  a tax,  while cutting                                                               
ADF&G funding,  is not a  supportable action and is  being viewed                                                               
as a crippling blow to the industry.                                                                                            
10:08:03 AM                                                                                                                   
REPRESENTATIVE   JOHNSON   commented   that   a   view   of   the                                                               
comprehensive  tax  plan has  been  requested  by other  interest                                                               
groups, and  explained that  the committee  process is  the first                                                               
step; prior  to proposals being  heard by the  finance committee.                                                               
He stressed that  interest groups are not being  singled out, but                                                               
rather  opportunities for  testimony are  being provided,  by the                                                               
specific committees,  in order to  assemble and  meld information                                                               
from all state resource areas.                                                                                                  
CHAIR STUTES  added that HB  251 is being thoroughly  reviewed in                                                               
committee to  honor that process  and provide the  time necessary                                                               
for public comment.                                                                                                             
10:11:08 AM                                                                                                                   
REPRESENTATIVE HERRON  noted that conversations were  held by the                                                               
executive branch, as  well as the legislature,  and asked whether                                                               
the association was in attendance.                                                                                              
MR.  DAVIS said  the  last opportunity  for  conversation was  in                                                               
June, 2015.   At that time, an agreement was  reached to continue                                                               
to  work closely  with  other resource  groups  and identify  any                                                               
large pots  of money.   The fisherman know  they will be  part of                                                               
the solution,  however, being  too compliant  may be  misread and                                                               
concern exits that the state might then impose further demands.                                                                 
REPRESENTATIVE HERRON noted  that the 1 percent  proposed tax has                                                               
generated wide comment, and he  asked if a different figure might                                                               
better serve the industry.                                                                                                      
MR.  DAVIS responded  that the  value  of the  fish and  products                                                               
would need to be studied to ascertain appropriate levies.                                                                       
10:14:42 AM                                                                                                                   
REPRESENTATIVE ORTIZ asked  whether the coop will  be impacted by                                                               
the budget cuts to ADF&G.                                                                                                       
MR. DAVIS said  any speculation would be broad based,  due to the                                                               
scope  of   activities  and  variables  involved;   however,  the                                                               
department  has  provided economic  health  by  way of  effective                                                               
10:18:35 AM                                                                                                                   
SCOTT FILE,  Commercial Fisherman,  said, after  45 years  in the                                                               
business,  fishing  remains  a   difficult  industry  to  be  in.                                                               
Certainly, ADF&G  has worked  to keep  the fisheries  stable, but                                                               
the fluctuations  in catch quotas,  fish prices/sales,  and other                                                               
factors continue to  be an economic burden  in fishermen's lives.                                                               
He  recalled several  situations  effecting  fisheries that  have                                                               
occurred during  the last  three decades,  and drew  a comparison                                                               
between the oil and fishing industries.  To wrap-up, he said:                                                                   
     Do we take money from families  in a recession - no.  I                                                                    
     believe we  are in  a recession  in this  state.   Do I                                                                    
     believe that the  state has cut enough -  I don't think                                                                    
     so.   Will people lose their  jobs - yes.   Will people                                                                    
     suffer - yes.   Will the cost of  this government, here                                                                    
     in the state,  dictate how we live our lives  - yes.  I                                                                    
     think the  state needs to  cut more.   I don't  want to                                                                    
     see the state end up like our federal government.                                                                          
10:22:35 AM                                                                                                                   
REPRESENTATIVE KREISS-TOMKINS  asked for  an opinion on  the cuts                                                               
being made to ADF&G.                                                                                                            
MR.  FILE  said reductions  need  to  be  done in  a  responsible                                                               
manner,  and expressed  concern  for effects  the reductions  may                                                               
have on fish management.                                                                                                        
REPRESENTATIVE KREISS-TOMKINS  asked whether there is  an area of                                                               
agency management that would be  perceived as less harmful to the                                                               
MR. FILE reaffirmed his previous statement.                                                                                     
10:24:42 AM                                                                                                                   
KRIS NOROSZ, stated opposition to HB 251, paraphrasing from a                                                                   
prepared statement, which read [original punctuation provided]:                                                                 
     I am here  representing Icicle Seafoods.   We have five                                                                    
     land plants and three floating processors.                                                                                 
     I appreciate  the opportunity to  testify and  that the                                                                    
     bill has  already had  several hearings.   I  have been                                                                    
     learning with you in these  hearings as I listen to the                                                                    
     presentations  by   the  Dept.   of  Revenue   and  the                                                                    
     discussions that result.                                                                                                   
     We  understand the  difficulties  we  face as  Alaskans                                                                    
     with the  State's current fiscal challenge  and we wish                                                                    
     to work together to be part of the solution.                                                                               
     However, as always,  the devil is in the  details.  And                                                                    
     we simply feel there  has not been enough consideration                                                                    
     and  analysis of  the impacts  of the  proposed action.                                                                    
     Nor,  and  perhaps  most importantly,  has  there  been                                                                    
     enough time to determine if  there is a better approach                                                                    
     to raise the  amount of funds needed to  bridge the gap                                                                    
     between revenues  and the cost of  ADF&G management and                                                                    
     research,  without  being  unduly  detrimental  to  the                                                                    
     Canned salmon can likely not  handle an increase in the                                                                    
     tax rate.   It is already at 4.5% which  is higher than                                                                    
     for  fresh  or fresh  frozen  products  and is  not  an                                                                    
     increase that can be passed on to the consumer.                                                                            
     I  am not  certain how  we  got to  our current  multi-                                                                    
     tiered rate structure.  But I  do know that in times of                                                                    
     large  run  strength, as  we  saw  in Bristol  Bay  and                                                                    
     Prince William  Sound this last season,  canning salmon                                                                    
     is  a  critical  component  to  handling  large  salmon                                                                    
     harvests, it can absorb a  very high volume.  We simply                                                                    
     don't   have  the   cold  storage   and  transportation                                                                    
     capacity  and  the  infrastructure to  handle  all  the                                                                    
     salmon that  is harvested  as fresh or  frozen product.                                                                    
     Now is  not the time to  raise the tax rate  for canned                                                                    
     In the past  two years the seafood industry  has had to                                                                    
     grapple with a  $2 increase in the  minimum hourly wage                                                                    
     and a strong  dollar on the world market  that has made                                                                    
     for considerably challenging  conditions to keep salmon                                                                    
     as  a  desirable  and  affordable  commodity  that  can                                                                    
     compete with other protein sources.                                                                                        
     Unlike some  of the other natural  resource industries,                                                                    
     the  fishery resources  are a  renewable resource  that                                                                    
     will continue to  provide revenues as long  as the runs                                                                    
     stay  healthy  and  are  managed  properly  for  future                                                                    
     generations as  mandated by our  Constitution.   It can                                                                    
     continue  to  generate  revenues   for  the  State  and                                                                    
     municipalities  and  continue   to  drive  the  State's                                                                    
     economy into perpetuity.                                                                                                   
     I  appreciate that  the bill  directs any  new revenues                                                                    
     collected  as a  result of  changing the  fisheries tax                                                                    
     rate to  go directly to the  State.  I would  feel more                                                                    
     comfortable  if we  had some  assurance that  the funds                                                                    
     would  be   used  to  cover  the   cost  for  fisheries                                                                    
     If the Fish & Game budget  is cut to such a degree that                                                                    
     they are unable to  adequately manage the fisheries, we                                                                    
     all  lose.     It  will  result   in  foregone  harvest                                                                    
     opportunities that  will lead to  a loss in  revenue to                                                                    
     the State and municipalities,  lost wages and jobs, and                                                                    
     a downward push on the State's economic vitality.                                                                          
     I  appreciate  Representative Johnson's  comments  that                                                                    
     the Legislature is not taking  a piecemeal approach but                                                                    
     rather  a   comprehensive  approach  to   bridging  the                                                                    
     State's fiscal  gap.   This is  very reassuring  and an                                                                    
     important  point to  have as  part  of the  Committee's                                                                    
     We  understand   it  is  going   to  take  all   of  us                                                                    
     contributing in a variety of  fashions to make this all                                                                    
     We wish to work with you  to find a solution we can all                                                                    
     live with to address the challenge before us.                                                                              
10:29:03 AM                                                                                                                   
REPRESENTATIVE MILLETT asked if a change in the department's                                                                    
management practices have been observed, following recent cuts,                                                                 
or has the status quo been maintained.                                                                                          
MS. NOROSZ surmised that with  less data available, ADF&G manages                                                               
more  conservatively.   She reported  that  fewer test  fisheries                                                               
have been observed.   Additionally, the level of  field work that                                                               
occurred  in  the 1970-80's  is  no  longer  taking place.    She                                                               
conjectured  that given  today's  technology, field  work may  be                                                               
handled differently with similar efficiency.                                                                                    
REPRESENTATIVE MILLETT asked for comment  on the impacts that the                                                               
tax will have on the industry.                                                                                                  
MS. NOROSZ opined  that the area least able to  absorb a raise in                                                               
tax  levels  is  canned  salmon.   She  maintained  the  need  to                                                               
entertain  another  assessment  model   to  arrive  at  a  viable                                                               
10:31:46 AM                                                                                                                   
REPRESENTATIVE HERRON  pointed out that  Ms. Norosz served  as an                                                               
expert on the Alaska Arctic  Policy Commission.  He asked whether                                                               
her  opinion  was  solicited by  the  administration,  when  this                                                               
industry tax was being formulated for proposal.                                                                                 
MS. NOROSZ answered, no, not specifically.                                                                                      
10:32:52 AM                                                                                                                   
REPRESENTATIVE  KREISS-TOMKINS asked  about  the market  dynamics                                                               
effecting canned salmon.                                                                                                        
MS. NOROSZ explained  that canned salmon is  possibly the highest                                                               
priced food sold,  and the price is critical on  the market shelf                                                               
as  a competitive  protein source.   Retailers  are faced  with a                                                               
difficulty when shelving such a price sensitive item.                                                                           
REPRESENTATIVE  KREISS-TOMKINS  asked  what percentage  of  gross                                                               
sales canned fish products represent for Icicle Seafoods.                                                                       
MS. NOROSZ offered to provide further information.                                                                              
REPRESENTATIVE  KREISS-TOMKINS asked  for an  opinion on  the tax                                                               
differential  for  developing  versus established  fisheries  and                                                               
would a flat tax be more efficient.                                                                                             
MS. NOROSZ offered to provide further information.                                                                              
10:36:56 AM                                                                                                                   
WALT PASTERNAK,  Fisherman, acknowledged  the need to  pay taxes,                                                               
as a  means for  citizens to  fund government.   He  reviewed the                                                               
myriad of  taxes that he pays  as a fisherman, which,  beyond the                                                               
raw fish  tax, also  include taxes  for:   marketing, aquaculture                                                               
enhancement,  federal individual  fishery  quota,  and a  fishing                                                               
vessel observer.   He reported that  a decade ago Sitka  passed a                                                               
citizens initiative that resulted in  a $10.00 box tax, levied on                                                               
charter caught  fish.  Although  a volunteer program, he  said it                                                               
has generated about  $120,000 per year and proven  helpful in the                                                               
local area.   The  proceeds are equally  divided and  directed to                                                               
harbor  maintenance,  aquaculture   enhancement,  and  the  Sitka                                                               
Marine Science Center.  Based on  the success of this program, he                                                               
suggested  the committee  consider  a charter  fish  tax to  help                                                               
offset the budget situation.                                                                                                    
CHAIR STUTES offered that a charter tax is being considered.                                                                    
10:40:10 AM                                                                                                                   
MIKE  SVENSON,  opined  that  ADF&G should  not  be  involved  in                                                               
setting tax rates.                                                                                                              
10:42:09 AM                                                                                                                   
JOHN  MURRAY,   Fisherman,  concurred  with   previous  testimony                                                               
regarding  the  need  to  consider  a tax  on  the  charter  boat                                                               
10:43:13 AM                                                                                                                   
SHAWN  GILMAN, Fisherman,  suggested focus  be given  to a  state                                                               
income  tax,  as everyone  benefits  from  the resources  of  the                                                               
state.   He  opined on  the  integration of  municipal and  state                                                               
taxes, as  well as  suggesting how  government becomes  top heavy                                                               
and where  administrative cuts could  occur.  Finishing,  he said                                                               
the  governor's  proposal has  a  basic  framework of  evenhanded                                                               
fairness to address the deficit.                                                                                                
10:47:14 AM                                                                                                                   
NANCY  HILLSTRAND,  Owner,   Pioneer  Alaskan  Fisheries,  stated                                                               
support for HB 251, and said fish  are a public trust held by the                                                               
state.  The 1 percent tax, as  well as a flat tax, imposed across                                                               
the board,  are acceptable measures  to implement.  She  held the                                                               
expectation for  accountability of the funds  generated, and that                                                               
they  will be  used to  benefit Alaskans,  fairly and  honorably.                                                               
The  subsidization  of hatcheries  is  an  area which  should  be                                                               
halted, as  they interfere  with, if  not harm,  wild runs.   She                                                               
mentioned  a  report by  the  Institute  of Social  and  Economic                                                               
Research  (ISER)  supporting  her   concern  for  hatcheries  and                                                               
suggested  ADF&G resources  would be  better used  if focused  on                                                               
managing wild stocks.  The original  hatchery act was to create a                                                               
means  for supporting  wild runs;  however, that  is not  what is                                                               
occurring  today  with  the private  non-profit  hatcheries  that                                                               
ADF&G  is bound  to  serve.   Further,  the  hatcheries glut  the                                                               
market with  the low  quality, low valued  fish.   An aquaculture                                                               
regime has been developed over the  last 40 years, which needs to                                                               
be  replaced with  appropriate habitat  protection  and wild  run                                                               
cultivation, and  include consideration for shellfish.   Finally,                                                               
the  value  added   jobs  that  benefit  China   should  also  be                                                               
10:50:23 AM                                                                                                                   
MARK ROBERTS,  Troll Fisherman, stated  opposition to HB  251 and                                                               
emphasized how difficult  it is to make a profit  at fishing.  He                                                               
said he  hasn't seen  a noticeable  change in  ADF&G's management                                                               
abilities.    He  stressed  that,   in  anticipation  of  another                                                               
financially difficult year, the  additional taxes will be hurtful                                                               
to the fishermen.                                                                                                               
10:52:17 AM                                                                                                                   
MIKE MANN,  Fisherman, stated support  for HB 251, and  opined on                                                               
the  necessity   to  continue  maintenance  of   state  supported                                                               
hatcheries, which are  a benefit to the fishermen.   He expressed                                                               
concern  for the  disbursement of  the tax  funds, stressing  the                                                               
importance  that revenues  be  well directed  and  used to  boost                                                               
local communities  and assist fishermen through  programs to buy-                                                               
back fishing permits.                                                                                                           
CHAIR STUTES  closed public testimony  after ascertaining  no one                                                               
further wished to testify.                                                                                                      
10:55:21 AM                                                                                                                   
REPRESENTATIVE  HERRON   referred  to   the  testimony   of  Walt                                                               
Pasternak  and the  state and  local taxes  which he  said he  is                                                               
responsible for paying.  The  member asked for a committee report                                                               
on the  taxes and  amounts that the  Sitka fisherman  is burdened                                                               
10:55:57 AM                                                                                                                   
REPRESENTATIVE KREISS-TOMKINS  noted a  common thread  of concern                                                               
is  the  perception that  a  piecemeal  approach is  being  taken                                                               
towards   solving   the   state's   budget   gap,   and   thanked                                                               
Representative Johnson for clarifying the process.                                                                              
10:56:43 AM                                                                                                                   
CHAIR STUTES  expressed personal  reservations for  HB 251.   She                                                               
reported  that  other  industry  bills,  being  reviewed  by  the                                                               
legislature, appear to be faltering.  She said:                                                                                 
       I believe that all resources should pay their fair                                                                       
     share, but I don't want to see the fishing industry be                                                                     
     the only one that's subject to a tax increase.                                                                             
CHAIR STUTES announced HB 251 as held.                                                                                          
10:58:27 AM                                                                                                                   
KEN  ALPER,  Director,  Tax  Division,  reported  that  an  Excel                                                               
spreadsheet  tax  model  has  been  posted  on  the  department's                                                               
website and is available for everyone to access and manipulate.                                                                 
[HB 251 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB251 Backup SEAFA.pdf HFSH 2/23/2016 10:00:00 AM
HB 251
HB251 Backup CDFU.pdf HFSH 2/23/2016 10:00:00 AM
HB 251
HB251 Backup Oneill.pdf HFSH 2/23/2016 10:00:00 AM
HB 251
HB251 Backup USAG.pdf HFSH 2/23/2016 10:00:00 AM
HB 251
HB251 Backup DOR Electronic Tax Submissions Percentile.pdf HFSH 2/23/2016 10:00:00 AM
HB 251
HB 251 Backup DOR Fish tax model- revenue by differrent tax rates.xlsx HFSH 2/23/2016 10:00:00 AM
HB 251
HB251 Backup UFA.pdf HFSH 2/23/2016 10:00:00 AM
HB 251
HB251 Backup Murray.pdf HFSH 2/23/2016 10:00:00 AM
HB 251
HB251 Backup PSPA.pdf HFSH 2/23/2016 10:00:00 AM
HB 251
HB251 Backup ALFA.pdf HFSH 2/23/2016 10:00:00 AM
HB 251
HB251 Backup ATA.pdf HFSH 2/23/2016 10:00:00 AM
HB 251