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updated 4/15/2010 11:41:10 AM ET 2010-04-15T15:41:10

The Alaska Senate approved a measure Wednesday that would lower Alaska's head tax on cruise ship passengers by at least $11.50 per person.

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The measure also would seemingly satisfy terms of a lawsuit settlement agreement between the attorney general and Alaska Cruise Association. It still must pass the House, with the Legislature scheduled to adjourn on Sunday.

Some lawmakers questioned whether the settlement and the rollback were in the best interests of the state and the public. Voters approved a head tax in 2006, with supporters seeing it as a way to help cover costs of infrastructure needed for large ships coming to port.

Senate Majority Leader Johnny Ellis said he was reluctant to alter what the people approved in a "significant" way.

Senate Finance Committee co-chair Bert Stedman, who carried the bill on the floor, responded to concerns by saying he'd seek adjustments if the cruise lines do not act in good faith.

The bill ultimately passed with three dissenting votes: Ellis; and Sens. Bill Wielechowski and Hollis French, all Anchorage Democrats.

Action by the Senate comes three days after Attorney General Dan Sullivan and cruise association president John Binkley signed an agreement that would settle a federal lawsuit over the state tax if the fee were reduced, as Gov. Sean Parnell had recommended, this year.

The bill does that, lowering the tax from $46 to $34.50 a person and allowing for deeper offsets for ships stopping in at least one of two ports — Juneau and Ketchikan. By one earlier estimate, it could cost the state about $22 million in passenger fees.

The tax has generated about $46 million for the state in recent years.

Chris Poag, an assistant attorney general, said he believes the bill would satisfy terms of the settlement; Binkley said his first read of the bill was the same.

But Chip Thoma, with Responsible Cruising in Alaska, called the bill "horrible" and said it creates inequity among ports.

Juneau and Ketchikan have their own head taxes; other communities get a share of the tax from the state. Under the measure passed from committee Wednesday, Juneau and Ketchikan are added as ports of call, meaning they'll get a cut from the state along with their local fees.

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Wielechowski said on the floor that the settlement agreement lacks any solid assurances that cruise ships will return in greater force if the tax cut takes effect.

One term says member cruise lines will work with the state to achieve the goal of making Alaska "a more attractive destination" and increasing ship traffic — "subject to economic conditions and each member line's overall market strategy."

"What is the evidence that we'll get something in return?" said Wielechowski, who also believes the state had a strong case in the lawsuit.

Poag has said that's the "most commitment" the state could get from the lines but that the state also intended to hold them to working on this.

The push for the cut began last month when Parnell attended a cruise ship trade show in Florida. The industry estimated that ships, accounting for about 142,000 passengers, won't come to Alaska this season.

Parnell then proposed the rollback and a tax credit program for corporations contributing to tourism marketing efforts as ways the state could address industry concerns that the cost of doing business in Alaska is too high.

The latter idea has gained no discernible traction in the Legislature, but there's been support — particularly among leading lawmakers — for a tax reduction.

Sullivan has noted that settlement of the suit with the cruise association would not preclude a lawsuit by another group over the tax issue.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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