Alaska fishing communities would take hit under Dunleavy proposal to end fish tax revenue-sharing

Gov. Mike Dunleavy proposed legislation this week that would keep commercial fish tax revenue that has for years been shared with Alaska fishing communities in the state’s coffers instead, a move that mayors in some of those cities say would be devastating.

At play are two taxes: Alaska’s fisheries business tax, and the fishery resource landing tax. Dunleavy’s legislation would repeal the fisheries business tax allocation to municipalities and repeal revenue sharing for the fishery resource landing tax. Those shared funds go to local governments in communities where fish processing and landings occur.

Under the proposed bill, about $28 million would stay in the state’s general fund in fiscal year 2020 instead of being shared with communities.

Dunleavy’s plan to close a $1.6 billion state budget deficit includes deep cuts, especially in education and health care, and does not include new taxes. His proposed budget still needs to go through the Legislature.

The fish taxes are crucial to many small Alaska fishing communities. The fisheries business tax is levied on fish caught commercially in Alaska waters, and is based on the price paid to commercial fishermen for the raw resource. The fishery resource landing tax is levied on fish caught commercially in federal waters and landed in Alaska, based on its unprocessed value.

Currently, the state tax division shares half of the amount of each of those collected taxes with the cities or boroughs where either the processing or the landings occurred. In fiscal year 2018, communities received about $29 million.

“There is a recognition that these are viewed as shared resources, and they should be shared by Alaskans,” said Dunleavy’s press secretary, Matt Shuckerow. “So that’s kind of what this proposal does. It takes shared resources and shares them with all Alaskans, not just some select communities.”

Dunleavy’s focus is on bringing state expenditures in line with revenues to address the deficit, Shuckerow said.

“We are really at this point where we have to make different decisions,” he said.

In a pair of statements Thursday, the Alaska Municipal League and the Alaska Conference of Mayors condemned the fish-tax decision and others made by the administration as part of its budget.

“Very quickly, we can ascertain that the proposed budget is less about state budget cuts and more about cost-shifting to lower levels of government,” Haines Borough Mayor Jan Hill said, reading the mayors’ statement at a press conference.

Dutch Harbor, in Unalaska, has been the No. 1 fishing port in the nation in terms of the amount of seafood landed for more than 20 years. Unalaska took in about $8 million from the fish taxes in 2018, according to the Alaska Department of Revenue’s tax division.

“This would be kind of devastating for us, by losing that revenue,” said Unalaska Mayor Frank Kelty. “This is going to be a major hit and naturally we’re going to scream bloody murder about it.”

[Under Dunleavy budget, state ferries would end service Oct. 1]

He worries about what losing the revenue would mean for funding Unalaska’s school district, utility systems and other services.

“These smaller communities, fisheries tax is a big part of their budget,” Kelty said.

Doug Griffin is executive director of the Southwest Alaska Municipal Conference, a regional economic development group that includes Bristol Bay, the Aleutian Islands and other areas home to fishing communities. He said the reductions would be significant for such local governments, especially on top of other parts of Dunleavy’s plan, such as education cuts.

“We’re sort of getting bombarded from all sides,” Griffin said.

“We’re fortunate that we have communities that have this resource at their doorstep, so to speak,” he said, referring to the fishing sector. “We also — a lot of people come in for short periods of time, they demand services. We’d certainly rather have the fish than not have the fish, but with it comes some responsibility to provide resources.”

Dozens of Alaska cities and boroughs get revenue from the fish taxes. The Kodiak Island Borough and the City of Kodiak got nearly $2 million in 2017 revenue from the business tax, and about $23,000 more from the landing tax, according to the state tax division.

“Taking that away with the other budget cuts, especially to the schools, which are part of the borough, and the school bond debt, would be devastating,” said Kodiak city Mayor Pat Branson.

In Cordova, Mayor Clay Koplin echoed Branson’s comments and said “it would be pretty devastating” if the community no longer received money from the fish taxes. The local government there will likely suggest some alternatives to the administration on the most important issues in the budget, Koplin said.

The fish tax change, public education and Dunleavy’s proposed cuts to the Alaska Marine Highway System are likely the big three, he said.

“We just want a seat at the table and we want a part in crafting a budget fix that doesn’t collapse our (Cordova’s) economy in the process,” he said.

Cordova received about $1.2 million in 2017 from the fisheries business tax.

“We understand, though," Koplin said, “that this is just the first chess move in the process of trying to get our arms around a $1.6 billion deficit.”

The Daily News’ James Brooks contributed reporting.