Legislature(2003 - 2004)

02/03/2004 01:30 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SB 273-ASMI BOARD/ SEAFOOD TAXES & ASSESSMENTS                                                                     
CHAIR CON  BUNDE called  the Senate  Labor and  Commerce Standing                                                             
Committee meeting  to order  at 1:30  p.m. Present  were Senators                                                               
Seekins,  French  and Chair  Bunde.  Senator  Davis was  excused.                                                               
Senator Stevens arrived at 1:31  p.m. The first order of business                                                               
to come before the committee was SB 273.                                                                                        
SENATOR  GARY  STEVENS,  sponsor  of   SB  273,  said  the  Joint                                                               
Legislative Salmon Task Force had worked  on this bill and it had                                                               
also been discussed in his marketing subcommittee. He commented:                                                                
     Very  quickly it  was apparent  to all  of us  that the                                                                    
     Alaska Seafood Marketing Institute  (ASMI) is the focus                                                                    
     of marketing for Alaska seafood.  It's a very important                                                                    
     element in  the industry and  whatever we do to  it, we                                                                    
     didn't want  to damage  it any more  than it  has been.                                                                    
     But because  of the loss of  funding, primarily through                                                                    
     salmon, the loss of the value  of salmon as well as the                                                                    
     volume, that  has had an  impact on ASMI. So  we looked                                                                    
     at the bottom  line. We realized that ASMI  - I believe                                                                    
     and the committee  believed, as well as  the task force                                                                    
     - that  we need to  keep around $7 million  coming into                                                                    
     ASMI annually  - plus assuming another  $2 million will                                                                    
     come in  from the federal  funding, as well -  in order                                                                    
     to allow  ASMI to  do the  job it is  supposed to  do -                                                                    
     which is  to market seafood products  from Alaska. They                                                                    
     are the generic marketer and do a very important job.                                                                      
SENATOR STEVENS said  one of the most contentious  elements in SB
273 is the reduction in the size  of the board from 25 members to                                                               
nine.  His   own  experience  on  large   membership  boards  and                                                               
observations  at  ASMI's  twice-yearly  meetings  illustrate  how                                                               
difficult it is for 25 members  to make decisions and move ahead.                                                               
Nine is not  a magic number, but he could  defend nine members as                                                               
being efficient and the number could always be increased.                                                                       
Second, ASMI needs to bring  in $7.3 million annually to function                                                               
properly.  Currently,  salmon fishermen  have  a  1 percent  tax.                                                               
Knowing  the industry  is  in  crisis, he  argued  to the  salmon                                                               
fishermen that it should be reduced  to .5 percent; but almost to                                                               
a  person, they  supported marketing  and didn't  want to  reduce                                                               
their tax.                                                                                                                      
SENATOR STEVENS  recapped that SB  273 changes the board  from 25                                                               
to nine members, keeps the  1 percent salmon tax, establishes the                                                               
.3  of  1  percent  processors'   tax  as  mandatory  instead  of                                                               
voluntary and  levies a  new tax on  all other  seafood products.                                                               
The  1  percent   salmon  tax  brings  in   $1.672  million,  the                                                               
processors'  tax would  bring  in $3.112  million  and all  other                                                               
species would bring  in $2.610 million. He  advised the committee                                                               
to keep an eye  on the bottom line and not  reduce taxes below $7                                                               
million.  ASMI's current  $4.5  million budget  is  less than  it                                                               
needs to do an adequate job.                                                                                                    
CHAIR BUNDE  asked Senator Stevens  to expand on  the controversy                                                               
surrounding the size of the board.                                                                                              
SENATOR STEVENS  elaborated that there  are many elements  in the                                                               
fishing industry, all  wanting to know how  they are represented.                                                               
If all were represented, the  board would have 125 people instead                                                               
of 25.                                                                                                                          
     You have  to assume  that a board  of nine  or whatever                                                                    
     the number  might be...that  the governor  appoints and                                                                    
     we  approve,  would  really be  looking  at  the  whole                                                                    
     industry....  I think  you have  to have  a board  that                                                                    
     represents the  whole state and when  they're appointed                                                                    
     realize  they are  statesmen, in  a way,  and not  just                                                                    
     representing their own particular interests....                                                                            
He  suggested the  best solution  for getting  the board  down to                                                               
nine members,  and one that he  has already talked over  with the                                                               
administration, is  for the governor  to ask for all  the current                                                               
members to resign and then establish an entirely new board.                                                                     
CHAIR BUNDE reminded the  committee that ASMI's constitutionality                                                               
had  been an  issue  in the  past  and asked  if  there had  been                                                               
discussion about SB 273's constitutionality.                                                                                    
SENATOR STEVENS said he hadn't heard anything about that issue.                                                                 
SENATOR  SEEKINS asked  if the  board members  were appointed  or                                                               
nominated by the governor for legislative approval.                                                                             
SENATOR STEVENS replied  that board members are  appointed by the                                                               
CHAIR BUNDE  added that  the board members  are not  confirmed by                                                               
the Legislature.                                                                                                                
SENATOR SEEKINS  said he  didn't know why  the word  "nominee" on                                                               
page 1,  line 14, is used  if the nominee wasn't  subject to some                                                               
sort  of   approval.  He  then   surmised  it  was   because  the                                                               
nominations  were made  by  people other  than  the governor.  He                                                               
asked why  salmon is  taxed at  1 percent  and all  other seafood                                                               
products are taxed at only .3 of 1 percent.                                                                                     
SENATOR  STEVENS replied  that  the current  tax structure  taxes                                                               
salmon at  1 percent  because salmon fishermen  are aware  of the                                                               
importance of marketing and see no reason to reduce it.                                                                         
SENATOR SEEKINS  asked if he  had received any feedback  from the                                                               
"others" who were going to have a mandatory tax.                                                                                
SENATOR STEVENS replied that one of the responses was:                                                                          
     You know,  I've never put  money into ASMI, so  I can't                                                                    
     complain  about  what  ASMI is  doing  and  actually  I                                                                    
     wouldn't  mind it  if some  of my  taxes went  to ASMI,                                                                    
     because  then I  would have  expectations of  what ASMI                                                                    
     does with that  money and I could have  some demands on                                                                    
     how that money is spent.                                                                                                   
Other  responses  from  various processing  firms  and  fishermen                                                               
indicated they don't want any new taxes.                                                                                        
SENATOR  SEEKINS  reflected  that  the salmon  industry  is  more                                                               
distressed than the rest, yet  they [salmon fishermen] are paying                                                               
the most.  He asked if  other segments  of the industry  need the                                                               
marketing  support as  well or  is  this assessment  meant to  be                                                               
industry's contribution to the salmon marketing effort.                                                                         
SENATOR  STEVENS clarified  that even  though fishermen  of other                                                               
species  have not  been taxed,  the processors  of those  species                                                               
have. He  estimated that twice as  much money would be  coming to                                                               
ASMI from  the processors than  from salmon fishermen  and almost                                                               
half again as much from fishermen of other species.                                                                             
1:47 p.m.                                                                                                                       
SENATOR HOLLIS FRENCH  asked Senator Stevens to  elaborate on the                                                               
elimination of the geographic  distribution requirement for board                                                               
SENATOR STEVENS  replied that other fishing  organizations in the                                                               
state,  like  the  North  Pacific  Fisheries  Management  Council                                                               
(NPFMC),   operate   with   fairly   small   boards   and   don't                                                               
geographically divide  up the state  for their  board membership.                                                               
By   dividing  the   state   geographically,   the  board   could                                                               
conceivably end  up with  all salmon fishermen  on it  instead of                                                               
other parts  of the  industry being  represented. "If  you really                                                               
try to  be totally representational  by gear type,  by fisheries,                                                               
by geographical area, that way leads to insanity."                                                                              
SENATOR FRENCH  surmised that  another danger  might be  having a                                                               
nine-member  board whose  members  are all  from  the Lower  Cook                                                               
Inlet and asked what in the bill would keep that from happening.                                                                
SENATOR  STEVENS  replied  that  that responsibility  is  on  the                                                               
shoulders of the governor who does the appointing.                                                                              
MR.  RAY RIUTTA,  Executive  Director,  Alaska Seafood  Marketing                                                               
Institute (ASMI, said  ASMI supports SB 273  and thanked everyone                                                               
for their efforts to help identify  the problems it is facing. He                                                               
related  how  ASMI  has become  extremely  dependent  on  federal                                                               
grants and  how the  value of [wild]  salmon has  decreased while                                                               
the world markets  have been flooded with  farmed salmon. Funding                                                               
that comes from the industry  to ASMI has decreased in proportion                                                               
to that  decrease in  value. Federal grants  have been  taking up                                                               
that slack  for a number of  years, but one grant  for $1 million                                                               
ends  this year  and  won't  be repeated.  Another  grant for  $2                                                               
million is  carrying ASMI  through this  year and  partially into                                                               
next year, but its continuance beyond that is in question.                                                                      
MR. RIUTTA  projected that  ASMI would receive  $2 million  to $3                                                               
million  in federal  grants  to fund  its  market access  program                                                               
(export program overseas) and very  little other money to support                                                               
domestic  marketing operations.  He said  the board  figures ASMI                                                               
needs a  $10 million to  $11 million  annual budget. ASMI  is not                                                               
asking for an increased budget,  but a stable budget that doesn't                                                               
fluctuate wildly  with the swings  of the fisheries  market. With                                                               
the estimated  $2 million in  federal funds, it needs  $7 million                                                               
to  $8 million  of additional  baseline funding.  The white  fish                                                               
industry is having  the same problems as the  salmon industry did                                                               
10 years ago. Part of  the across-the-board assessment is to help                                                               
address that problem.                                                                                                           
SENATOR SEEKINS  asked if the  red meat  scare had any  effect on                                                               
demand for seafood.                                                                                                             
MR. RIUTTA  replied that it is  too early to measure,  but people                                                               
are   increasingly  moving   from  red   meat  to   seafood.  The                                                               
marketplace  for seafood  has great  opportunities in  the months                                                               
MR. BRENT PAINE, Executive Director,  United Catcher Boats (UCB),                                                               
Anchorage, said they  had been in existence for 11  years and are                                                               
primarily based  in Seattle. They  represent most of  the catcher                                                               
vessels  that fish  for Pollock  and cod  and half  their vessels                                                               
fish for  crab in  the Bering  Sea. There  are 63  member vessels                                                               
from the roughly  112 catcher boats that fish the  Bering Sea for                                                               
pollock and  cod and the 300  vessels that fish for  crab. UCB is                                                               
primarily involved with  fisheries at the federal  level and less                                                               
at the  state level, since  National Marine Fisheries  Service is                                                               
the primary manager of their fishery.                                                                                           
UCB  strongly  opposes  increased  taxation on  their  fleet  for                                                               
marketing  services by  ASMI for  ground  fish at  this time.  He                                                               
informed them that  the pollock fleet in the  Bering Sea harvests                                                               
roughly 600,000 metric  tons of pollock a year and  they would be                                                               
responsible for paying  almost half of the  increased taxation or                                                               
almost $1 million.                                                                                                              
Members' concerns  include not  knowing what  the money  would be                                                               
used  for  and that  it  would  address  problems in  the  salmon                                                               
industry, not in the white  ground fish industry. They don't like                                                               
filling  in the  gap  to  solve the  falling  revenues of  salmon                                                               
fishermen.  Marketing of  their  products is  done  at a  private                                                               
level through  the producers of  the final product made  from the                                                               
fish that they catch.                                                                                                           
MR.  PAINE  bewailed  the  fact that  this  measure  is  taxation                                                               
without representation  because most of the  Bering Sea fishermen                                                               
are not  Alaskan residents.  Further, shrinking  the size  of the                                                               
board doesn't allow for representation  of all fisheries that are                                                               
being taxed.                                                                                                                    
MR. PAINE  pointed out that the  UCB is made up  of fishermen and                                                               
not marketing  experts and he  felt that  the board needed  to be                                                               
made  up  of  professional   marketing  people,  not  necessarily                                                               
fishermen or processors.                                                                                                        
SENATOR SEEKINS asked him to  repeat what percentage of his fleet                                                               
is Alaska owned.                                                                                                                
MR. PAINE  replied that the fleet  that fishes in the  Bering Sea                                                               
is probably about 95 percent non-Alaskan.                                                                                       
2:00 p.m.                                                                                                                       
MS. DONNA  PARKER, F/V Sea Storm,  said she and her  husband fish                                                               
for  pollock and  cod  and  also own  a  gillnetter in  Southeast                                                               
Alaska. She is the former  fisheries liaison with ASMI and helped                                                               
draft the original legislation.                                                                                                 
She suggested making all the  assessments in SB 273 voluntary and                                                               
felt  that the  duties of  the board  should be  expanded to  all                                                               
seafoods on a  species by species basis. Finally,  language in SB
273 proposes to  tax the boat, the permit, the  quota and all the                                                               
deck  hands and  she favored  an  assessment on  the vessel  only                                                               
     Having been  a fisherman  for many  years in  Kodiak, I                                                                    
     know how it filters down  to the back deck. These costs                                                                    
     are taken  off of the  top, so we  would pay for  it at                                                                    
     that point  - on the  expenses of the boat,  then taken                                                                    
     off the top  in terms of expenses for the  quota and by                                                                    
     the time  it got down to  us who are on  the back deck,                                                                    
     we already would have paid  for two or three times. So,                                                                    
     I  think  that  language  should be  amended  to  be  a                                                                    
     specific assessment to the vessel.                                                                                         
CHAIR BUNDE  responded that Senator  Stevens was making  notes of                                                               
her concerns for further discussion.                                                                                            
MR.  BRUCE SCHACTLER,  Marketing  Chairman,  United Fishermen  of                                                               
Alaska,  said  he   is  also  president  of   the  United  Salmon                                                               
Association. He felt the tax proposal  was fair and had heard the                                                               
white  fish  industry  vigorously   asking  for  money  to  begin                                                               
addressing  the   marketing  problems   they  foresee   in  their                                                               
industry. While he supported a  smaller board, Mr. Schactler felt                                                               
that  the issue  should be  dealt with  in separate  legislation,                                                               
because it wasn't connected to taxation at all.                                                                                 
CHAIR  BUNDE  thanked  everyone for  their  testimony  and  asked                                                               
Senator Stevens to notify him when  he was ready to hear the bill                                                               
SENATOR  STEVENS  thanked  ASMI   members  for  their  input  and                                                               
reiterated that  the real goal  is to establish  stable long-term                                                               
funding so that ASMI can continue to operate into the future.                                                                   

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