A few years ago, I did some preliminary reporting on how much the state actually makes in taxes from the commercial fishing industry, minus state-funded management of, and state-funded infrastructure for, the industry. What I began to suspect: When we’re just talking about pure state-coffer cash, it appears that we’re actually losing money on the multi-billion dollar commercial fishing industry, touted as the second-largest industry in Alaska. An important caveat: this does not include money that gets funneled through the state from industry-wages—though the value of those wages are less specific because we don’t have a broad-based income or sales tax. Nor does it include money localities get from fees and taxes on the industry, which might otherwise come out of general-fund revenue.
I was reminded again about that story when I looked at the DOR’s report on revenue released yesterday and read that the state actually brings in more money from taxes on tobacco than it does from taxes on fisheries, and mining, for that matter. In FY 2015, the state is projected to bring in only $26.7 million from fisheries, and only $24.7 million in FY 2016.
A commenter, who appears to know what he/she is talking about, says that when the numbers are crunched, the state actually subsidized the commercial fishing industry by as much as $60 million a year. Read on:
Alaska continues to subsidize commercial fisheries management to the tune of $60 million plus.
Fisheries taxes, business and landing, is about $25 – $30 million, but that revenue is roughly one third the cost of commercial fisheries management, not including state infrastructure for ports, hatcheries, remote airports that service primarily commercial fisheries…
Fish are a public resource to be used for the maximum benefit of the people of the state.
Commercial fisheries utilized 98.2 percent of all fish and game harvest in Alaska in 2012, or 3,240 million pounds. Private use (commercial profits) is subsidized by $50 – $60 million-plus annually drawn from the state general fund, over and above monies generated by the current fisheries taxes. In 2012, the $50 – $60 million subsidy generated about $1.3 million in ex-vessel values (harvesters) and $3,5 million in first wholesale value (processors + harvesters).
For each pound of commercial fish product leaving the state it generated roughly $1 of revenue. It cost the state about 3 cents a pound to manage these fisheries, of which the commercial fisheries tax revenues generated about 1 cent per pound.
It will be up to the Legislature to determine if the seasonal and low profit margin commercial fishing industry can afford any increase in their tax structure, or should the state continue to subsidize this industry, or should it look to cut overhead management costs, which could threaten the future sustainability of the fisheries or force them into more conservative management regimes from less comprehensive management and oversight.
Contact Amanda Coyne at amandamcoyne@yahoo.com
1) A lot of the harvest takess place in federal waters not state. 2) Sounds like possibly comments from a member of the commercial sport fishing industry AKA big recreation. I wonder how they balance out with taxes paid? Didn’t see that industry mentioned. I wonder why. I guess we all have our sacred cows to defend.
Nice to get the big Econ guns out to fact check economic claims and counter claims in commercial fisheries in Alaska, which generate more than 50 percent of the nation’s poundage of commercially harvested seafood in US waters (NOAA).
On the one hand(right hand), we always hear the claim that commercial fisheries are the state’s largest employer (of out of state, temporary workers earning less than the hourly minimum wage).
On the other hand state (left hand) public officials (with taxing authority) hear that the earnings in this seasonal industry are just so razor thin, variable and unpredictable that it cannot possibly generate any additional tax revenues over and above replacement costs of state management services (any commercial fishery advocacy when the topic of fisheries taxation comes up).
On both hands (outstretched and cupped together), commercial fisheries are just so valuable to the state’s economy that the jobs, profits and tax revenues generated virtually trumps any economic values offered by other resource development industries in Alaska (recent opinion piece in ADN as to why oil and gas exploration in Bristol Bay should be banned forever, because commercial fisheries and oil and gas production can never co-exist (even though Cook Inlet is home to both successful commercial fisheries and oil and gas industries for more than sixty years)).
On the one foot (left foot) the claim is made by commercial fisheries economic cheerleaders (John Sackton of Seafood.com and rebroadcast by others) state that economic data reported by NOAA (NOAA) shows that commercial fisheries are so much larger in revenue, jobs, and tax revenues (once imported seafood from outside the United States are factored into the equation) than that of the nation’s recreational fisheries that any discussion of economics in allocation discussions between these two sectors that utilize common fisheries resources is absolutely absurd.
On the other foot (right foot) a national alliance of seafood processors, including Alaska, release a defiant protest press release denouncing the last version of the Magnuson Stevens Act reauthorization draft that Senator Begich released as one of his last acts as Senator, because it calls for allocations between commercial and recreational sectors to be analyzed by regional fisheries councils on a regular basis, based on the economic values generated by these allocations (the implicit assumption being that allocating fisheries resources based on economic output is a fools gold and impossible journey).
In one eye (left eye), an industry that has been around for more than one hundred years in Alaska states that it is proud to generate surplus jobs, profits and tax revenues.
In the other eye (right eye) that same industry claims that it cannot be around for another hundred years if anyone looks at the potential of generating additional surplus tax revenues to the state during this time of draconian and potentially devastating revenue deficits (it like someone has a thorough knowledge of how the 100 year climate change modeling forecasts are generated that show practically anything alive in the ocean today is a dead man walking endangered species).
If we are collectively going to sway to the refrains of banning oil and gas leasing and the Pebble mine in Bristol Bay, and ban further future timber sales in the Tongass, and scuttle allocation discussions in commercial and recreational fisheries based on optimized economic values, then by all means let’s have an open and transparent discussion about the jobs, profits and tax revenues generated by commercial fisheries in Alaska as it harvests and processes more than 3 billion pounds of seafood annually, and then also talk the tradeoffs of not increasing investments in other resource development industries in Alaska.
Of course one can expect that some will claim such a discussion would be irresponsible and juvenile…
Just like the name D’Pez Poopsie.
Your ceaseless attacks on Mr Cole are getting old.
If you have nothing good to say about somebody, then say nothing at all.
If she did her job right, then your mamma should have taught you that lesson a long time ago.
Grow up already Jon, you come off as an angry, petulant child.
Usually you are more careful than to publish such unsubstantiated numbers. I appreciated Mr Knapp’s comments. He has proven, in the past, to be a fair and reasonable economist.
Gunnar: I ordered one of your reports today that might help me fact check some of this. In the meantime, can you send me what you might have? amandamcoyne@yahoo.com. Thanks.
It’s disappointing to see this claim of a $60 million subsidy without a citation that would make it possible to see how the calculation was done and whether it was done correctly. It’s easy to make mistakes in this kind of analysis.
The answer to is Dermot Cole isn’t a honest broker. The report forecasts a huge increase in capital spending,more projects coming on line, and an increase in production. Dermot brushes this aside. It is also worth noting that DOR changed its methodology last year to be much more conservative. It no longer assumes projects are going into development. That said, with the arrival of Caelus, Hilcorp, Brooks Range, and the expansion of development in existing fields, a record lease sale this year, and a huge amount of drilling and exploration slated for this season, the future doesn’t look bleak. But Dermot is convinced that SB 21 is bad and Parnell was bad, so he cannot accurately report what the RSB reports.
The figures Amanda is using to slam the fishing industry are incomplete, as FedUp points out. The commercial fishing industry covers its own costs of management and enforcement when all taxes are factored in. To say it is subsidized to the tune of $60 million is not true – it should not be taken at face value by a writer who is not involved with or knowledgeable about Alaska’s largest employer. You seem to have it in for the fishing industry, Amanda. That’s your choice, but please be careful to use facts and figures that are accurate.
Here’s an idea Amanda. Why don’t you talk to some fish economists to find out what they have to say about the variable tax revenue and administrative costs of our (state) fisheries.
Be sure to delve into the spillover effects of a wildly profitable federal fisheries sector – which, if you were to be very technical about it, is also being subsidized by the state through ports and other infrastructure spending.
We also spend more on public toilets located in state parks than they earn. Maybe we should start charging by the minute or the square of toilet paper?
There are two reasons to tax. The first being to discourage something (i.e. tobacco and alcohol and/or at least provide a mechanism for funding the social costs associated with them). The second is to retain resource rents and recirculate the money earned and spent extracting a resource (state fisheries) within the state economy.
We tax oil to retain some amount of the (passively earned) value of the resource in the state. But it’s a much higher value resource on a much longer investment timeline. Fish values and profits fluctuate seasonally and the vast majority of fishermen operate on very thin profit margins with little wiggle room to financially plan beyond one season at a time.
We need to be taxing oil based on what what it’s likely lifetime value (the lifecycle of a field) is to be (this is how the majors make investment decisions) but fisheries taxes can provide the necessary management fundiing and support to preserve the resource so that fisherman can enter or exit the industry as their finances allow in what is basically a paycheck to paycheck business.
To compare fish taxes to tobacco taxes or mining taxes is disingenuous to the extreme.
Got any comments on this? I realize it’s not related to this article. As I remember you were an avid supporter of SB 21:
http://www.adn.com/article/20141211/state-revenue-report-predicts-declining-oil-production-2024
Portions of the fish taxes are remitted back to local governments and municipalities as well, in some cases 50%, so the state “share” of that $24-26M is actually far less.
Also, I’d like to see or hear of some fact checking on that $60M subsidy figure.
Thanks for the input.
Amanda,
This is a very incomplete and misleading picture of the contribution of the fishing industry to the state’s coffers. The numbers you are referring to only include fisheries business taxes and landing taxes. What about CFEC fees, marketing assessments, enhancement taxes, corporate taxes from seafood processors, license and permit fees, test fish receipts, and federal funds that come to the state for commercial fisheries management? DCCED used to do a net returns publication that calculated all the state revenue and expenditures related to certain major industries including commercial fisheries. The most recent document I can find online is from fiscal year 2005 (http://www.commerce.state.ak.us/pub/Net_Rate_of_Return_Overview.pdf), but it concludes the fishing industry was a net positive to the state’s budget to the tune of about $11 million. Things have changed since FY2005, but I doubt we’ve gone from an $11 million dollar surplus to a $60 million dollar subsidy.
That was the comment of the year!
Unconstitutional giveaway! It’s our fish! Our politicians are bought and sold by the fishing industry! Where is Bert Stedman and Rep. Seaton? Why aren’t they standing up to ensure we get out fair share?
Yes, the oil industry subsidizes the commercial fishing industry. And commercial fishermen begrudge every salmon caught for personal use, especially by a tourist (even though that tourist may have spent $5,000 to catch one king salmon). I saw a bumper sticker one time that said, “I would rather have my daughter work in a whore house than my son work on a charter boat.” I asked the fellow if he had any pictures of his daughter but he had absolutely no sense of humor.
Fishing in Bristol Bay, I know funds go directly to the borough as you mentioned in your comments, but which your expert did not. Also, when looking at Bristol Bay commercial fisherires, you have to factor sports fishing into the cost as well. And then there is what subsistence fishing brings in to the families which is not counted. This article was way too slanted toward the cost of commercial fisheries without considering the other factors. And don’t get me started on mining re: the little that is contributed to state coffers but the huge amount that has been required in restoration which in many cases hasn’t beend one (I am referring to the old days when destruction of salmon streams was ignored).