One of Gov. Mike Dunleavy’s main missions maintains that ‘Alaska is open for business.’
“As Governor, I want to assure companies that Alaska is open for business by taking meaningful steps to lessen burdens on employers and encourage opportunities for our skilled workforce across the state,” Dunleavy said in a January press release introducing four new bills to support this mission. “This means lowering burdensome regulations, modernizing outdated statutes, promoting government efficiencies, keeping our citizens safe, and maximizing the use of our abundant resources.”
But the mariculture industry — which includes aquatic farming and enhancement of wild fisheries like oyster and geoduck — claims he’s doing the opposite of that with a proposed budget change for a federally mandated test that checks shellfish for poisonous toxins before they are sold to consumers. If shellfish containing paralytic shellfish poison (PSP) is consumed, it can be deadly. PSP is becoming more common: in the past five years the number of tests that failed rose from 20 percent to 80 percent, according to SARDFA, the Southeast Alaska Regional Dive Fisheries Association.
The current budget funds PSP testing for shellfish through June 30, 2020. In the governor’s proposed budget for the next fiscal year starting July 1, the Department of Environmental Conservation (DEC) proposed shifting that cost onto the farmers, an appropriation that last year totaled almost half a million dollars. The current version of the House’s operating budget, which passed this week, rejected the proposed cost shift. The Senate has yet to decide to reject or accept this cost shift. Even if they also reject it, Dunleavy could still veto it.
Meta Mesdag, the President of the Alaska Shellfish Growers Association, said the cost shift is “an impossible ask.”
By the numbers
Last year, the Legislature appropriated $457,700 for this testing, a number which Mesdag thinks is too high for only 26 farms to cover. Those costs would eat into about a third of grower revenue, which was $1.6 million in 2019. Industry leaders say this would be devastating to existing industry and restrict future expansion.
“[Mariculture] has been identified year after year as a great opportunity for economy growth in our state,” Mesdag said in an interview. “And we have an administration, due to bureaucracy, that is threatening to shut it down over something that across the nation is considered the status quo to be covered by the state.”
In a letter she penned to the House Finance Committee and DEC Commissioner Jason Brune, she said, “asking a nascent industry that produced $1.6 million in revenue last year to absorb $457,700 in program expenses will decimate shellfish farming in Alaska.”
In 2016, former Gov. Bill Walker created the Alaska Mariculture Task Force. Dunleavy kept that task force in place when he assumed office. The task force is against the cost shift.
The task force penned a letter to the Legislature’s Finance Committees stating that if implemented, the proposed budget would dampen investment in the nascent industry and hamper competition by Alaska companies, which is the opposite of the task force’s goal to grow mariculture to a $100 million industry in 20 years.
“This public health service assures that commercially available shellfish is safe for consumption,” the task force letter said. “At the current size of the mariculture industry, the proposed fees are not financially feasible nor realistic. The rate increases will be devastating to the existing industry and (will) restrict future expansion.”
“The state is fully on board with growing this industry however, they seem to not understand that in order to do so we must have the necessary infrastructure in place to comply with federal mandates, and it’s not the farmers responsibility, but a matter of public safety,” Mesdag said.
Mesdag said most legislators she’s been talking to agree.
“I’m hopeful that things remain as they have been,” said Rep. Dan Ortiz, I-Ketchikan. “It makes perfect sense in the name of food safety that the state carries out the responsibility of protecting the public. The fund source makes sense, as well. I’m hoping that things will remain the same.”
However, opponents of the state funding the program view it as an unnecessary subsidy.
Safety vs. subsidy
The Office of Budget and Management document for the department states: “The commercial industry continues to rely on this government subsidy and does not pay the existing fees for regulatory shellfish testing, only the cost to collect and ship samples to the Environmental Health Laboratory… No private laboratories in Alaska have obtained FDA approval, and it is unlikely that another state laboratory outside Alaska will be able to process shellfish samples from Alaska without compensation.”
All other states subsidize this program as well, though, Mesdag said, and she said she personally asked a lab in Maine, Bigelow Analytical Services, how much they would charge to do all of the state of Alaska’s testing. They said they would do all of the state’s tests for $31,000 a year. But that would hit the business, as well, since shipping the samples to Maine for testing would take longer and give the product less shelf life.
“We would like to keep it in house in Anchorage so we can get the results within 24 hours,” Mesdag said. “We just would like to find a way for the environmental health lab to manage their costs to reflect the operating costs of the other labs in the nation.”
“They’re saying that they’re subsidizing our program,” Mesdag said. “The reality is if Maine can do this for $31,000 a year, the industry believes that we are actually subsidizing the environmental health lab. If they’re asking us to spend $457,700 a year to subsidize their program for a test that should cost $31,000 a year to operate.”
DEC Commissioner Jason Brune did not respond to multiple requests for comment on this story.
While Mesdag recognizes the state’s budget issue, she argued that taking away these funds would have a negative economic impact and effectively force shellfish growers out of business.
“It is our understanding that this proposal would result in an increase in the state’s budget deficit by increasing the use of general fund dollars for the program,” she said in a letter to Brune. “It seems imprudent to increase the deficit in a manner that will put nearly all Alaska shellfish growers out of business.”
This situation perfectly illustrates the disconnect between the State’s talking points — Alaska is open for business, for example — and it’s fiscal behavior. You can’t strip away infrastructure and increase barriers to entry, in one of the toughest business environments in North America, and reasonably expect the outcome to be economic growth. Hopefully this message will get through before the administration does irreparable harm to this and other fledgling Alaska industries.
It seems Alaska is ‘open for business’ for big business only. The Gov shows support for gas and oil, mining, and industrial tourism. But small business? Not so much. He has attempted to eliminate milk inspection in Mat Valley, eliminating one business entirely and halting any other dairy that might start, not to mention the effect on all the support businesses. He is willing to shut down the shellfish industry, he has damaged small business all over coastal Alaska with his shut-down of the Marine Hwy.
One of the reasons for the very high cost of shellfish testing is due to the federal requirements. The State is required to use methods dictated by FDA, in a FDA certified lab. I doubt Bigelow could perform the FDA testing for $31,000. However, it’s most appropriate for FDA to allow new new test methods which could reduce test costs. But until that happens, the Alaska DEC testing will remain expensive. It should also be noted that ADEC test costs include a lot of overhead costs. The true cost of PSP testing is probably a good deal less than the… Read more »
Another example of a commercial fishery in Alaska that can’t afford to pay its own bills and expects government subsidies to make it profitable. The seafood industry exports $6 billion annually, but cries wolf anytime it is asked to cover its expenses and contribute to the bottom line of the state. The dirty little secret is that the seafood industry tax structure is rigged to only pay on the ex-vessel harvest value, not the wholesale value. Typically the ex-vessel value is less than $2 billion, yet the export value is around $6 billion. That means $4 billion in value annually… Read more »
Help me understand why it’s sensible to subsidize outside oil companies in vain hopes to prop up Alaska production in collapsing markets, but it’s heresy to do the same for our home-grown industries as they gain a foothold in growing markets? Are we so conservative we can’t invest in our own future?
I didn’t know this about ISER’s report on commercial fishing taxes. Really interesting, and as a former deckhand who likes to support commercial fishing politically, it sounds like we need to put our money where our mouth is and tax ourselves appropriately. But like Brandon, I don’t understand how you (or I guess UAA’s ISER?) can claim that the seafood industry “gets the most subsidies”? As I understand it, our recently-created oil tax credits (instituted by our former governor Parnell, an oil exec) gave away billions in subsidies to oil companies? How do you square this, and can you please… Read more »