Legislature(2007 - 2008)CAPITOL 106

02/06/2007 11:00 AM House ECONOMIC DEV., TRADE, AND TOURISM


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11:03:52 AM Start
11:10:46 AM Presentation: Economic Impact on Alaska by Alaska Native Corporations
11:55:04 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation by Chugach Alaska TELECONFERENCED
Corporation's Sheri Buretta & Vicky Otte:
Economic Impact on Alaska by Alaska
Native Corporations
                    ALASKA STATE LEGISLATURE                                                                                  
 HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL                                                               
                       TRADE AND TOURISM                                                                                      
                        February 6, 2007                                                                                        
                           11:03 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mark Neuman, Chair                                                                                               
Representative Kyle Johansen                                                                                                    
Representative Vic Kohring                                                                                                      
Representative Bob Lynn                                                                                                         
Representative Andrea Doll                                                                                                      
Representative Mike Doogan                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Carl Gatto                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION:  ECONOMIC IMPACT ON ALASKA BY ALASKA NATIVE                                                                       
CORPORATIONS                                                                                                                    
                                                                                                                                
     -HEARD                                                                                                                     
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                              
SHERI BURETTA, President                                                                                                        
Association of ANCSA Regional Corporation Presidents/CEOs;                                                                      
Chairman of the Board                                                                                                           
Chugach Alaska Corporation                                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented on behalf of the Association of                                                                  
ANCSA Regional Corporation Presidents/CEOs.                                                                                     
                                                                                                                                
VICKI OTTE, Executive Director                                                                                                  
Association of ANCSA Regional Corporation Presidents/CEOs                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented on behalf of the Association of                                                                  
ANCSA Regional Corporation Presidents/CEOs.                                                                                     
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR MARK NEUMAN called the  House Special Committee on Economic                                                             
Development, International Trade and  Tourism meeting to order at                                                               
11:03:52  AM.   Representatives Neuman,  Doll, Doogan,  Lynn, and                                                             
Kohring  were  present at  the  call  to order.    Representative                                                               
Johansen arrived as the meeting was in progress.                                                                                
                                                                                                                                
^PRESENTATION:    ECONOMIC  IMPACT  ON ALASKA  BY  ALASKA  NATIVE                                                             
CORPORATIONS                                                                                                                  
                                                                                                                                
CHAIR NEUMAN announced  that the only order of  business would be                                                               
the presentation:   Economic  Impact on  Alaska by  Alaska Native                                                               
Corporations.                                                                                                                   
                                                                                                                                
SHERI   BURETTA,  President,   Association   of  ANCSA   Regional                                                               
Corporation Presidents/CEOs  and Chairman  of the  Board, Chugach                                                               
Alaska  Corporation, began  the presentation  by introducing  the                                                               
report titled,  Ch'etbuja 'We Share  It', which was  published by                                                             
the  Association of  ANCSA  Regional Corporation  Presidents/CEOs                                                               
(the Association).  The report  outlines the financial data of 13                                                               
Native regional corporations and  29 Native village corporations.                                                               
The Association was formed in 1998  by the presidents and CEOs of                                                               
the regional  Native corporations to  focus on the  common issues                                                               
of  government,  legislative  and  regulative  policies,  and  to                                                               
promote  joint   venture  business  opportunities   and  maximize                                                               
shareholder  hire.    The Alaska  Native  Claims  Settlement  Act                                                               
(ANCSA),  passed  in   1971  by  the  U.S.   Congress  to  settle                                                               
aboriginal land  claims against  the federal  government, divided                                                               
Alaska into  12regions and authorized the  creation of for-profit                                                               
regional  corporations and  more than  200 village  corporations,                                                               
collectively   known   as   the   Alaska   Native   Corporations.                                                               
Compensation  to  the  Alaska   Native  Corporations  totaled  44                                                               
million  acres  of  land  and  a cash  settlement  of  over  $900                                                               
million.                                                                                                                        
                                                                                                                                
VICKI  OTTE, Executive  Director, Association  of ANCSA  Regional                                                               
Corporation  Presidents/CEOs, and  shareholder of  MTNT LTD,  and                                                               
Doyon,   Limited,  described   the   enrollment  procedures   for                                                               
shareholders.    She noted  that  103,000  Natives are  currently                                                               
enrolled.                                                                                                                       
                                                                                                                                
CHAIR NEWMAN asked  the presenters about changes  they would like                                                               
to see in ANCSA.                                                                                                                
                                                                                                                                
MS. OTTE related  that many amendments to ANCSA over  the past 35                                                               
years have made improvements when needed.                                                                                       
                                                                                                                                
11:10:46 AM                                                                                                                   
                                                                                                                                
MS.  BURETTA   referred  to   early  Alaska   Native  Corporation                                                               
difficulties, such as Chugach  Alaska Corporation's bankruptcy in                                                               
1982, which  were largely due  to management's  inexperience with                                                               
corporate   structure  and   Western-style  business   practices.                                                               
Currently,  with  the  support  of programs  such  as  the  Small                                                               
Business  Administration's 8(a)  Business Development  Plan ("SBA                                                               
8(a)"), corporations  have been able to  develop their businesses                                                               
and become profitable.                                                                                                          
                                                                                                                                
CHAIR  NEWMAN asked  the  presenters to  address  the sharing  of                                                               
profits between the 12 regional area corporations.                                                                              
                                                                                                                                
MS.  OTTE referred  to ANCSA  Section  7(i) Settlement  Agreement                                                               
("ANCSA  Section  7(i)"),  signed  in 1982,  which  directed  the                                                               
corporations to share 70 percent of revenues.                                                                                   
                                                                                                                                
CHAIR NEUMAN inquired  about the management of  the general fund,                                                               
which holds the shared revenues.                                                                                                
                                                                                                                                
MS. BURETTA explained  that the funds are not held  in a pool but                                                               
rather  are distributed  by the  regional  corporations based  on                                                               
enrollment.                                                                                                                     
                                                                                                                                
MS.  OTTE  pointed  out  that  the revenue  is  shared  with  the                                                               
regional   and    village   corporations,   and    the   at-large                                                               
shareholders.                                                                                                                   
                                                                                                                                
CHAIR NEUMAN commented on the success of ANCSA.                                                                                 
                                                                                                                                
REPRESENTATIVE DOLL  asked about  the payment of  corporate taxes                                                               
to the State of Alaska.                                                                                                         
                                                                                                                                
MS.  BURETTA stated  state  and  federal taxes  are  paid by  the                                                               
corporations.                                                                                                                   
                                                                                                                                
11:16:09 AM                                                                                                                   
                                                                                                                                
MS. OTTE added that in one  reporting year $27.1 million was paid                                                               
in federal and state taxes.                                                                                                     
                                                                                                                                
REPRESENTATIVE DOOGAN inquired as to  how many Alaska Natives are                                                               
not shareholders currently.                                                                                                     
                                                                                                                                
MS. OTTE informed  the committee that 104,000  Alaska Natives are                                                               
shareholders, but  she said  she was  not sure  of the  number of                                                               
Alaska Natives not  enrolled.  She noted  three corporations have                                                               
periods of open enrollment.                                                                                                     
                                                                                                                                
REPRESENTATIVE LYNN asked how one's bloodline is determined.                                                                    
                                                                                                                                
MS.  BURETTA stated  enrollment  is made  with  a Certificate  of                                                               
Indian  Blood (CIB)  issued by  the U.S.  Department of  Interior                                                               
Bureau of Indian Affairs (BIA).                                                                                                 
                                                                                                                                
REPRESENTATIVE  LYNN suggested  that Deoxyribonucleic  Acid (DNA)                                                               
can be used to follow migration patterns and bloodlines.                                                                        
                                                                                                                                
11:19:12 AM                                                                                                                   
                                                                                                                                
MS. BURETTA confirmed that the  determination for Native Alaskans                                                               
was made on  December 18, 1971, and thus those  who were enrolled                                                               
by that date were [considered to be] Native Alaskans.                                                                           
                                                                                                                                
REPRESENTATIVE LYNN suggested the use  of DNA could be researched                                                               
at a later date.                                                                                                                
                                                                                                                                
REPRESENTATIVE JOHANSEN  asked for  a definition of  a "landless"                                                               
Native.                                                                                                                         
                                                                                                                                
MS. OTTE clarified that open  enrollment shares [shares companies                                                               
offered to Native Alaskans after  1971] cannot be willed to heirs                                                               
while the  shares of Native  Alaskans enrolled prior to  1971 can                                                               
be willed to  heirs with specific blood quantum  to remain voting                                                               
shares.                                                                                                                         
                                                                                                                                
MS.  BURETTA said  "landless"  Natives are  members  of the  13th                                                               
Regional Corporation, most of which  were living Outside when the                                                               
corporations were formed.  These  Native Alaskans were allowed to                                                               
form a corporation but received no land.                                                                                        
                                                                                                                                
REPRESENTATIVE  JOHANSEN  referred to  Congressional  legislation                                                               
proposed by U.S.  Senator Lisa Murkowski to  address the problems                                                               
of the 13th Regional Corporation.                                                                                               
                                                                                                                                
MS.  BURETTA reported  that some  of  the regional  corporations,                                                               
though  struggling  at  their  inception,  are  now  the  largest                                                               
companies in the state with  business endeavors ranging from real                                                               
estate  to tourism  and oil  field operations.   She  pointed out                                                               
that the  ANCSA regional  corporations are  unique in  that their                                                               
shareholder stock  is inalienable  "ANCSA Section  7(i)" requires                                                               
regional  corporations  to  share  70 percent  of  its  resources                                                               
revenues with other regional and  village corporations.  Over the                                                               
last 35  years, the  regions have shared  over $675  million with                                                               
each other.   In 2004,  a sample  of 42 Native  corporations held                                                               
combined revenues  of $4.47 billion  [gross] and assets  of $3.57                                                               
billion  [gross].   Ms.  Otte  relayed  that ANCSA  charges  [its                                                               
corporations]   to   continually   enhance  their   position   as                                                               
financially strong  Native corporations  in order to  promote the                                                               
economic  and social  well-being of  shareholders.   Furthermore,                                                               
the  corporations  provide  jobs,   revenue,  and  commitment  to                                                               
improving Alaska's economy.                                                                                                     
                                                                                                                                
11:25:24 AM                                                                                                                   
                                                                                                                                
CHAIR NEUMAN  commended the Alaska  Native corporations  on their                                                               
success.                                                                                                                        
                                                                                                                                
MS. OTTE spoke of the  village corporation, to which she belongs,                                                               
with profits of  $1.2 million last year of which  87 percent came                                                               
from government contracting operations.                                                                                         
                                                                                                                                
CHAIR  NEUMAN inquired  as  to  the percentage  of  the work  [of                                                               
Native corporations] occurs in Alaska.                                                                                          
                                                                                                                                
MS. BURETTA stated Chugach Alaska  Corporation has work in Alaska                                                               
but most work is done in the Lower 48 and other countries.                                                                      
                                                                                                                                
MS.  OTTE informed  the committee  that 17  regional and  village                                                               
corporations were  recognized in  2006 as ranking  among Alaska's                                                               
top  49  businesses.   In  fact,  7  of  the  top 10  were  ANCSA                                                               
corporations.   In addition, 16  Native for-profit  and nonprofit                                                               
entities are in the top 100 of the largest employers in Alaska.                                                                 
                                                                                                                                
MS. BURETTA  noted, in 2004, the  total equity for the  13 Native                                                               
regional corporations  was $1.64 million, which  is significantly                                                               
higher than the  original ANCSA cash settlement  of $962 million.                                                               
The total  dividend payout for  the 42 corporations  surveyed was                                                               
$117.5  million  in   2004.    Most  of  the   earnings  paid  to                                                               
shareholders are spent in Alaska  facilitating further growth and                                                               
investment in the state.                                                                                                        
                                                                                                                                
MS.   OTTE,  speaking   of  employment   issues,   said  the   42                                                               
corporations  participating in  the Association's  report had  an                                                               
Alaska  work force  of about  12,500 employees  in 2004.   Hiring                                                               
Alaska Natives and  shareholders and their families is  a part of                                                               
the Associations' commitment and policies.                                                                                      
                                                                                                                                
11:29:53 AM                                                                                                                   
                                                                                                                                
CHAIR NEUMAN  asked if the  Native corporations work  together on                                                               
workforce development.                                                                                                          
                                                                                                                                
MS.  BURETTA  explained  that   the  regional  corporations  have                                                               
individual nonprofit  programs and benefits are  balanced between                                                               
scholarships and  programs for elders.   She noted  that although                                                               
each  corporation has  its own  [scholarship and  elder programs]                                                               
they also utilize consortiums.                                                                                                  
                                                                                                                                
MS. OTTE further noted that  Alaska Native Corporations gave $8.5                                                               
million to charities and various  nonprofit organizations, in the                                                               
reporting  year  of  2004, in  addition  to  funding  scholarship                                                               
programs and endowments.                                                                                                        
                                                                                                                                
MS. BURETTA  described the increase of  work tribal organizations                                                               
are doing for  the federal government through  the Small Business                                                               
Administration's  8(a) Business  Development Program.   In  2004,                                                               
the  $141 million  in  payroll  that was  paid  by Alaska  Native                                                               
Corporations "SBA  8(a)" businesses made a  significant impact on                                                               
Alaska's economy.                                                                                                               
                                                                                                                                
REPRESENTATIVE DOLL  asked Ms.  Buretta for  examples of  the non                                                               
profits that receive charitable funding.                                                                                        
                                                                                                                                
MS. BURETTA named  The United Way, Catholic  Social Services, The                                                               
Chugach Heritage Foundation  and Museum, and Safe  Harbor as some                                                               
of the recipients of charitable funding.                                                                                        
                                                                                                                                
REPRESENTATIVE DOLL noted that these  gifts are given on regional                                                               
and tribal levels.                                                                                                              
                                                                                                                                
MS. BURETTA  referred again to  the "SBA 8(a)" program  which, in                                                               
2004,  awarded  13 percent  of  its  contracts to  Alaska  Native                                                               
corporations.                                                                                                                   
                                                                                                                                
MS.  OTTE emphasized  that  this amount  represents  less than  1                                                               
percent of all the federal government contracts.                                                                                
                                                                                                                                
CHAIR  NEUMAN  asked  if  "SBA 8(a)"  is  the  Native  preference                                                               
program.                                                                                                                        
                                                                                                                                
MS. BURETTA  clarified by  saying the "SBA  8(a)" program  is for                                                               
all disadvantaged  small businesses.  She  expressed concern over                                                               
the  special  interest  groups  that  wish  to  terminate  Native                                                               
traditional  and  statutory rights  in  the  "SBA 8(a)"  program,                                                               
which would  [negatively] impact  the Native communities  and the                                                               
State of Alaska.                                                                                                                
                                                                                                                                
11:37:28 AM                                                                                                                   
                                                                                                                                
MS. OTTE  concluded by  relating that  the presentation  today is                                                               
just the  "tip of the  iceberg" in  terms of the  contribution of                                                               
ANCSA corporations to Alaska's economy for the past 35 years.                                                                   
                                                                                                                                
CHAIR NEUMAN thanked the presenters  and asked for questions from                                                               
the committee.                                                                                                                  
                                                                                                                                
REPRESENTATIVE DOOGAN  asked [what caused] the  sharp increase in                                                               
income reported for 2001.                                                                                                       
                                                                                                                                
MS. BURETTA said  she believes it can be attributed  to when Cook                                                               
Inlet Region, Inc. (CIRI) sold its wireless communications.                                                                     
                                                                                                                                
CHAIR NEUMAN  asked how the  Alaska Native corporations  view the                                                               
[proposed] natural gas pipeline.                                                                                                
                                                                                                                                
MS. BURETTA related  that the corporations are  excited about the                                                               
proposed natural  gas pipeline.   In  fact, the  corporations are                                                               
preparing to participate in the  project by anticipating the need                                                               
for  labor  and  recognizing  that the  pipeline  route  will  go                                                               
through regional corporation lands.   She expressed hope that the                                                               
state   recognizes   the   opportunity  to   partner   with   the                                                               
corporations with the natural gas pipeline.                                                                                     
                                                                                                                                
CHAIR  NEUMAN  asked  about  the  development  of  businesses  to                                                               
support the [proposed] pipeline.                                                                                                
                                                                                                                                
MS.  BURETTA explained  that Native  corporations have  companies                                                               
which  are  in the  pipeline  support  business already  and  are                                                               
successfully providing  a high  level of  service to  the federal                                                               
government.                                                                                                                     
                                                                                                                                
CHAIR NEUMAN inquired  as to how the State of  Alaska could model                                                               
the "SBA 8(a)" program.                                                                                                         
                                                                                                                                
MS.  BURETTA discussed  the benefits  privatization  can have  on                                                               
operations, such as Chugach  Alaska Corporation's [military] base                                                               
operation and maintenance.                                                                                                      
                                                                                                                                
CHAIR  NEUMAN reflected  on the  controversy of  privatization of                                                               
government contracts.                                                                                                           
                                                                                                                                
MS. OTTE indicated  that hiring from the community is  one way to                                                               
solve some of the problems of privatization.                                                                                    
                                                                                                                                
11:46:40 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE LYNN  recalled a  presentation at the  World Trade                                                               
Center Alaska  (WTCAK), regarding the opportunity  for harvesting                                                               
Alaska blueberries.                                                                                                             
                                                                                                                                
MS. OTTE confirmed that, in  Kenai, an organization is looking at                                                               
the potential market for blueberries and mushrooms.                                                                             
                                                                                                                                
CHAIR  NEUMAN asked  the  presenters  about value-added  products                                                               
being developed by the Alaska Native Corporations.                                                                              
                                                                                                                                
MS. BURETTA pointed  out that the Alaska  Native Corporations own                                                               
raw   natural  resources,   and   the   potential  for   resource                                                               
development  is  great.   However,  environmental  issues  are  a                                                               
challenge  to harvesting  natural  resources.   Another  economic                                                               
factor is  the subsistence economy  in the rural  communities and                                                               
how  to  address  protection  of  the  land  and  development  of                                                               
resources.                                                                                                                      
                                                                                                                                
CHAIR NEUMAN  inquired as to long-range  land resource management                                                               
plans.                                                                                                                          
                                                                                                                                
MS.  BURETTA  confirmed that  Chugach  Alaska  Corporation has  a                                                               
detailed land  management plan in place.   Each region is  in the                                                               
process of getting conveyance to its entitlements.                                                                              
                                                                                                                                
CHAIR NEUMAN asked if the conveyances have been completed.                                                                      
                                                                                                                                
MS.  OTTE replied  that  about 2  million acres  have  yet to  be                                                               
conveyed by the 2010 deadline.                                                                                                  
                                                                                                                                
CHAIR  NEUMAN  spoke  of  the   state  mandate  to  look  at  the                                                               
development of  boroughs and incorporations  of areas.   He asked                                                               
if the  Alaska Native Corporations  can help communities  to form                                                               
organized boroughs.                                                                                                             
                                                                                                                                
11:55:04 AM                                                                                                                   
                                                                                                                                
MS. BURETTA  reminded the committee  that Alaska  communities are                                                               
very  different in  size and  needs.   Formation of  boroughs can                                                               
have  a  large impact  on  smaller  communities, especially  with                                                               
regard to school districts.                                                                                                     
                                                                                                                                
REPRESENTATIVE  DOLL  asked for  an  explanation  of the  tension                                                               
between the regional corporations and the tribal organizations.                                                                 
                                                                                                                                
MS. BURETTA expressed concern that  the corporations have income,                                                               
but  the   tribes,  which  are  responsible   for  governing  and                                                               
providing  services for  people in  the  villages, do  not.   The                                                               
Alaska Native Corporations  are trying to work  with villages and                                                               
help to provide economic benefits to rural communities.                                                                         
                                                                                                                                
REPRESENTATIVE  JOHANSEN  remarked  that Ketchikan  regional  and                                                               
village corporations are working together.                                                                                      
                                                                                                                                
CHAIR NEUMAN thanked the presenters.                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special  Committee on  Economic Development,  International Trade                                                               
and Tourism meeting was adjourned at 12:02 p.m.                                                                                 

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