Legislature(2003 - 2004)
02/03/2004 01:30 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 governor. 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 members. 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 ahead. 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 because: 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 again. 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.