Carlson v. State and the Privileges and Immunities Clause: the Alaska Wrinkle in Nonresident Fishing Fee Differentials

• Citation: Vol. 21
• Publication year: 2004

§ 21 Alaska L. Rev. 91. CARLSON V. STATE AND THE PRIVILEGES AND IMMUNITIES CLAUSE: THE ALASKA WRINKLE IN NONRESIDENT FISHING FEE DIFFERENTIALS

Alaska Law Review
Volume 21
Cited: 21 Alaska L. Rev. 91

CARLSON V. STATE AND THE PRIVILEGES AND IMMUNITIES CLAUSE: THE ALASKA WRINKLE IN NONRESIDENT FISHING FEE DIFFERENTIALS

Sarah H. Davis

I. INTRODUCTION

II. PROCEDURAL HISTORY

A. Carlson I

B. Carlson II

C. Carlson III

III. THE PRIVILEGES AND IMMUNITIES CLAUSE

IV. ALASKA'S OIL REVENUE STRUCTURE

V. CARLSON V. STATE AND THE PRIVILEGES AND IMMUNITIES WRINKLE

A. Does Carlson violate the rules established in Toomer

B. Fitting Carlson within the Toomer test

VI. CONCLUSION

FOOTNOTES

Under U.S. Supreme Court precedent, a state can charge nonresident commercial fishermen more for commercial fishing fees where the state shows the differential merely compensates the state for expenditures from resident-only taxes. In Carlson v. State, the Alaska Supreme Court held that certain funds used for fisheries expenses were the analytical equivalent of resident-only taxes because the money was raised by the state from oil revenues. This Note argues that the unique structure of the Alaska state economy in its use of oil revenues creates a wrinkle in the Federal Privileges and Immunities Clause.

I. INTRODUCTION

When people hear that I am a member of the Alaska Law Review, the most frequently asked question is "Why is the Alaska Law Review at Duke University?" Inevitably, the question that follows is "Why does Alaska need a review of its law?" One could argue that every state should have its own publication where legislators can debate with the practitioners to hash out legal issues. However, Alaska has a unique need for a law review because of its inherent "differentness" from the contiguous states. ^[1] First, even [*pg 92] though Alaska is one of the least populous states in the union, it is the largest and the richest in natural resources. ^[2] The overwhelming presence of the oil industry in Alaska affects Alaska's economic structure, environmental laws, and tax system. ^[3] Second, Alaska is a relatively new state and therefore does not have the same depth of legal precedent possessed by many other states. ^[4] Finally, after the oil industry boom during the 1970s, the State created the Alaska Permanent Fund, which gathers a percentage of annual oil revenues and reinvests the money, distributing dividends to residents, and paying for economic development within the state. ^[5] Even beyond the Permanent Fund, oil revenues make up approximately eighty percent of the state's economy, ^[6] making Alaska unique among other states in that "most of [the] costs of state government (including fisheries management) come from oil revenues belonging to only residents." ^[7] In Carlson v. State, Commercial Fisheries [*pg 93] Entry Commission, the oil revenues serve to create another legal issue unique to Alaska: a wrinkle in the Privileges and Immunities Clause of the U.S. Constitution.

This Note addresses how the Alaska Supreme Court dealt with the unique nature of the Alaska state economy within the strictures of the Privileges and Immunities Clause. The court allowed the State to charge nonresident commercial fishermen more for commercial fishing fees than resident commercial fishermen as long as the fee differential merely compensated the State for the added expense of the nonresidents or balanced out expenses borne by residents to which nonresidents do not contribute. ^[8] Part I of the Note looks at the long procedural road the case has taken and explains the holdings of each case. Part II examines how the Privileges and Immunities Clause limits discriminatory licensing fees such as the one at question in Carlson. Part III explains the importance of oil revenues to the Alaska government and why Alaska residents have a personal stake in the spending of oil revenues. Finally, Part IV examines how Alaska's economy creates a wrinkle in the Privileges and Immunities Clause, allowing Alaska to charge nonresident fishermen more than residents.

II. PROCEDURAL HISTORY

Carlson has been before the Alaska Supreme Court three times and has twice been denied certiorari by the U.S. Supreme Court. ^[9] The case has a long and complicated history that began when the Alaska legislature amended its commercial fishing license law to provide that "[t]he amount of an annual fee for a nonresident shall be three times the amount of the annual fee for a resident." ^[10] The 3:1 ratio was developed through state statutes, ad-[*pg 94] ministrative regulations, and attorney general opinions. ^[11] The State also required that vessel owners buy a limited entry permit which "control[s] . . . the number of people who can fish in a given geographic area," again charging nonresident vessel owners three times the amount of resident vessel owners. ^[12]

In 1983, a group of nonresident fishermen sued the State, claiming that the differential fees violated the Commerce Clause and the Privileges and Immunities Clause of the U.S. Constitution. ^[13] The group formed a class that included "all persons who participated in one or more Alaska commercial fisheries at any time who paid non-resident assessments to the State for commercial or gear licenses or permits." ^[14]

A. Carlson I

In Carlson I, the State moved for summary judgment, claiming that the 3:1 ratio did not violate the Privileges and Immunities Clause and the Commerce Clause because the "fee ratio partially reimburses the State for that portion of the costs of fisheries management, enforcement and conservation attributable to nonresidents." ^[15] The State included the following in its calculation of the cost of fisheries management: the annual operating budget of the Commercial Fisheries Entry Commission ("CFEC"); ^[16] the percent-[*pg 95] age of the operating budget of the Department of Public Safety attributable to the amount of money spent on commercial fisheries enforcement; and the annual operating budget of the Department of Fish and Game for both the Division of Commercial Fisheries ("DCF") ^[17] and the Fisheries Rehabilitation Enhancement and Development Division ("FREDD"). ^[18] The State then determined what percentage of these expenditures was attributable to nonresident fishermen. ^[19] According to the State's calculations, the 3:1 ratio was actually favorable to nonresidents because if the State had taken into account the per capita amount of fish caught by nonresidents, the fee differential would have been greater than 3:1. ^[20] The class argued that the State should not be able to include all of these expenses in its calculation, but rather should only take into account the budget of the CFEC or, alternatively, should also take into account "all sources of revenue to the State attributable to the nonresident commercial fishermen." ^[21]

The superior court held that the 3:1 fee ratio violated neither the Privileges and Immunities nor the Commerce Clauses. ^[22] Based on the Privileges and Immunities Clause, the court held that the State had a permissible reason for discriminating against nonresidents: "to have the non-resident[s] pay a part of their fair share of the costs of enforcement, management and conservation of the fisheries of this State, which costs are largely borne by the residents through general fund expenditures." ^[23] Based on the Commerce Clause, the superior court held that the "legitimate local purpose" -- balancing the costs paid by residents and nonresidents in [*pg 96] commercial fisheries -- and the fact that the differential was the least restrictive means to satisfy that purpose justified the discrimination against interstate commerce. ^[24] Therefore, the 3:1 ratio was upheld. ^[25]

The Alaska Supreme Court reversed the superior court decision. ^[26] Because commercial fishing came within the scope of the Privileges and Immunities Clause, the court held that the State had to show "a substantial reason for the discrimination, and whether the 3:1 fee ratio bears a sufficiently close relationship to the goal." ^[27] The court looked to the U.S. Supreme Court's decision in Toomer v. Witsell, ^[28] which held that a 100:1 differential fee for fishing licenses violated the Privileges and Immunities Clause because South Carolina did not prove the extra cost to the nonresident was justified by the "added enforcement burden" imposed on the State by nonresident fishermen or for expenditures "from taxes which only residents pay." ^[29] The Court stated, "[N]othing in the record indicates that non-residents use larger boats or different fishing methods than residents, that the cost of enforcing the laws against them is appreciably greater, or that any substantial amount of the State's general funds is devoted to [fisheries] conservation." ^[30] Further, the Alaska court relied on Mullaney v. Anderson, ^[31] which stated, "[C]onstitutional issues affecting taxation do not turn on even approximate mathematical determinations. But something more is required than [a] bald assertion to establish a reasonable relation between the higher fees and the higher cost to [Alaska]." ^[32] The court noted that the amount of support needed to "demonstrate a sufficiently 'close connection' to a legitimate state purpose" [*pg 97] is unclear. ^[33] The analysis under the Commerce Clause was "quite similar" ^[34] and the court concluded again that...