Legislature(2017 - 2018)BARNES 124

01/24/2018 03:15 PM LABOR & COMMERCE

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Audio Topic
03:18:35 PM Start
03:19:25 PM Overviews: Department of Labor & Workforce Development; Department of Commerce, Community & Economic Development
04:46:14 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overviews: TELECONFERENCED
- Dept. of Labor & Workforce Development
- Dept. of Commerce, Community & Economic
Development
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                        January 24, 2018                                                                                        
                           3:18 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
Representative Sam Kito, Chair                                                                                                  
Representative Adam Wool, Vice Chair                                                                                            
Representative Andy Josephson                                                                                                   
Representative Louise Stutes                                                                                                    
Representative Chris Birch                                                                                                      
Representative Gary Knopp                                                                                                       
Representative Colleen Sullivan-Leonard                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
Representative Bryce Edgmon (alternate)                                                                                         
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEWS: DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT;                                                                         
DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC DEVELOPMENT                                                                        
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
GREG CASHEN, Acting Commissioner                                                                                                
Department of Labor & Workforce Development (DLWD)                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented an overview of DLWD with the use                                                               
of a PowerPoint presentation.                                                                                                   
                                                                                                                                
PALOMA HARBOUR, Director                                                                                                        
Division of Administrative Services (ASD)                                                                                       
Department of Labor & Workforce Development (DLWD)                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions during the DLWD                                                                       
overview.                                                                                                                       
                                                                                                                                
MIKE NAVARRE, Commissioner Designee                                                                                             
Department of Commerce, Community & Economic Development (DCCED)                                                                
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Presented an overview of DCCED  with the use                                                            
of a PowerPoint presentation.                                                                                                   
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:18:35 PM                                                                                                                    
                                                                                                                                
CHAIR  SAM  KITO called  the  House  Labor and  Commerce  Standing                                                            
Committee  meeting to  order at  3:18  p.m. Representatives  Wool,                                                              
Josephson, Stutes,  Birch, Knopp, Sullivan-Leonard,  and Kito were                                                              
present at the call to order.                                                                                                   
                                                                                                                                
^OVERVIEWS:     DEPARTMENT  OF  LABOR  &  WORKFORCE   DEVELOPMENT;                                                              
DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC DEVELOPMENT                                                                        
    OVERVIEWS:  DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT;                                                                
    DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC DEVELOPMENT                                                                
                                                                                                                                
3:19:25 PM                                                                                                                    
                                                                                                                                
CHAIR  KITO announced  that the  only order of  business would  be                                                              
overviews  of the  Department  of  Labor &  Workforce  Development                                                              
(DLWD)  and  the  Department of  Commerce,  Community  &  Economic                                                              
Development (DCCED).                                                                                                            
                                                                                                                                
3:20:08 PM                                                                                                                    
                                                                                                                                
GREG   CASHEN,  Acting   Commissioner,  Department   of  Labor   &                                                              
Workforce Development  (DLWD), began the overview  by referring to                                                              
slide 2  of his  PowerPoint presentation;  the slide was  entitled                                                              
"Department Overview."   He stated that the mission  of DLWD is to                                                              
protect workers  and advance  opportunities  for employment.   The                                                              
three key  program priorities  are as  follows:  protect  Alaska's                                                              
workers   through   statutory  and   regulatory   assistance   and                                                              
enforcement;  workforce  development to  support  Alaska hire  and                                                              
economic  development;   and  income   replacement  for   injured,                                                              
unemployed, and permanently disabled workers.                                                                                   
                                                                                                                                
ACTING COMMISSIONER  CASHEN directed the committee's  attention to                                                              
slide  3,   entitled  "Department  Organizational   Chart,"  which                                                              
illustrates  the department's organizational  chart by  displaying                                                              
the  three key  program areas  and the  respective agencies  under                                                              
each.                                                                                                                           
                                                                                                                                
ACTING COMMISSIONER  CASHEN referred to slide 4,  entitled "FY2019                                                              
Governor's   Budget:  $147,109.7,"   and  offered  the   following                                                              
statistics:   the governor's budget  for fiscal year 2019  (FY 19)                                                              
totals  $147,109,000;  50 percent  is  from federal  funds;  $20.6                                                              
million is from  the unrestricted general fund (UGF)  - down $12.8                                                              
million, or  38 percent, from  FY 15; and  the department  has 754                                                              
positions - down 123 positions from FY 15.                                                                                      
                                                                                                                                
3:22:28 PM                                                                                                                    
                                                                                                                                
ACTING COMMISSIONER  CASHEN turned  to slide 5, entitled  "Protect                                                              
Workers," and  relayed the  accomplishments for  FY 19  under that                                                              
priority   area  as   follows:     The   DLWD's   Wage  and   Hour                                                              
Administration  staff, who  are  responsible  for conducting  wage                                                              
and   hour  investigations,   collected  $1   million  in   wages,                                                              
penalties, and  interest owed to  Alaska workers.   The Mechanical                                                              
Inspection Section  (MIS) staff  conducted over 6,500  inspections                                                              
and  over  2,000 job  site  visits  to  ensure worker  and  public                                                              
safety.   The  Alaska  Labor Relations  Agency  (ALRA) issued  100                                                              
percent of  its decisions in  an average of  69 days -  well below                                                              
the  target  of 90  days.    The Alaska  Occupational  Safety  and                                                              
Health  (AKOSH) staff's  efforts  contributed  to Alaska's  record                                                              
low workplace lost time injuries and illnesses rate.                                                                            
                                                                                                                                
ACTING  COMMISSIONER CASHEN  referred  to the  graph  on slide  6,                                                              
entitled  "Workplace Lost  Time  Injuries and  Illnesses Rate  per                                                              
100  Employees."   He  pointed  out that  that  there  has been  a                                                              
downward trend of  the lost time injuries and  illnesses rate; the                                                              
FY 17  rate is half  of that of  FY 07.   He said that  DLWD staff                                                              
impacted  the  rate  by  focusing   consultation  and  enforcement                                                              
efforts on  the causes of lost  workday injuries and  illnesses in                                                              
the   construction,   transportation,   and   seafood   processing                                                              
industries.    He  stated  that   in  FY  17,  the  transportation                                                              
incident  rate saw  a 14  percent reduction  and the  construction                                                              
rate saw a 24  percent reduction, bringing lost  time injuries and                                                              
illnesses rates  for those  industries to the  lowest levels  in a                                                              
decade and exceeding the target reduction of 3 percent.                                                                         
                                                                                                                                
3:24:13 PM                                                                                                                    
                                                                                                                                
ACTING COMMISSIONER  CASHEN referred to slide 7,  which identifies                                                              
the challenges under  the "protect workers" priority.   He relayed                                                              
that MIS  staff and  AKOSH staff  must travel  to remote  areas of                                                              
the  state; the  cost of  rural  travel can  create a  significant                                                              
burden  to the program;  and travel  costs have  increased  in the                                                              
past  few fiscal  years.   He  offered  that  AKOSH is  especially                                                              
vulnerable  to high  travel costs,  as travel  is frequently  last                                                              
minute  due  to  fatalities,  catastrophes,   or  imminent  danger                                                              
complaints  requiring prompt  responses.   He added that  turnover                                                              
continues  to be  a  challenge,  particularly for  highly  skilled                                                              
industrial  hygienists.    These  workers  do  not  make  salaries                                                              
comparable to opportunities  in the private sector.   He said that                                                              
providing timely  dispute resolution  is an ongoing  challenge for                                                              
ALRA,  especially   because  many  factors  are   outside  of  the                                                              
agency's control.                                                                                                               
                                                                                                                                
ACTING  COMMISSIONER  CASHEN  referred  to slide  8  to  highlight                                                              
legislation  related  to  DLWD.   Proposed  legislation,  HB  121,                                                              
addresses  AKOSH  penalties,  and proposed  legislation,  HB  114,                                                              
would  establish  a  $10  fee for  paper  filings  of  boiler  and                                                              
unfired  pressure vessel  inspection  reports; both  bills are  in                                                              
the  Senate Labor  and Commerce  Standing Committee.   He  relayed                                                              
that HB  255 was introduced  January 2018 by Representative  Chris                                                              
Tuck and  was referred  to the House  Labor and Commerce  Standing                                                              
Committee;  this proposed  legislation  would  change the  penalty                                                              
for individuals  performing electrical or plumbing  work without a                                                              
valid certificate of fitness from a misdemeanor to a violation.                                                                 
                                                                                                                                
3:26:25 PM                                                                                                                    
                                                                                                                                
ACTING  COMMISSIONER  CASHEN  continued  with  slide  9,  entitled                                                              
"Workforce  Development,"  to relay  the accomplishments  in  that                                                              
priority  area.    The  accomplishments   are  as  follows:    The                                                              
Division  of  Employment   and  Training  Services   (DETS)  staff                                                              
provided  career and technical  services  to over 98,000  Alaskans                                                              
through  the Alaska  Job Center  Network (AJCN).   Division  staff                                                              
also    increased   the    number    of   healthcare    registered                                                              
apprenticeship  programs   from  7  to   22  and  the   number  of                                                              
apprentices  from 32 to  220; the  employers were from  Metlakatla                                                              
to  Utquiagvik and  Yakutat to  Unalaska.   Division staff  served                                                              
over  1,000  youth with  disabilities  through  credential  career                                                              
pathway  programs -  internship  programs,  transition camps,  and                                                              
summer  work  experiences.   These  programs  were funded  with  a                                                              
federal disability  employment initiative grant.   In the Division                                                              
of Vocational  Rehabilitation (DVR), staff  significantly expanded                                                              
the  preemployment  transition   services  program  to  serve  846                                                              
students with disabilities  in over 100 communities  across Alaska                                                              
as required  by the federal  Workforce Innovation  and Opportunity                                                              
Act (WIOA).                                                                                                                     
                                                                                                                                
3:27:55 PM                                                                                                                    
                                                                                                                                
ACTING COMMISSIONER  CASHEN moved on to slide 10  and continued to                                                              
cite  the   accomplishments  under  the  "workforce   development"                                                              
priority.   The DETS placed  job center  staff at the  Goose Creek                                                              
Correctional Center  (GCCC) and  the Hiland Mountain  Correctional                                                              
Center   (HMCC)  through   the  federal   Linking  to   Employment                                                              
Activities  Pre-Release (Leap)  grant to  assist inmates  prior to                                                              
reentry.   The Leap grant is  a two-year grant  providing $250,000                                                              
each year  for the  activities.   The Alaska Vocational  Technical                                                              
Center (AVTEC) achieved record high graduation rates.                                                                           
                                                                                                                                
ACTING  COMMISSIONER  CASHEN turned  to  the  graph on  slide  11,                                                              
entitled  "Percent   of  AVTEC  Long-Term  Program   Students  Who                                                              
Graduate  (exceeded the  target  of 80  percent in  FY2017)."   He                                                              
said that in FY  17, 97 percent of AVTEC students  who enrolled in                                                              
long-term  training programs  completed the  training; 88  percent                                                              
of FY  16 AVTEC  students were employed  in training-related  jobs                                                              
one year  later; and  AVTEC reduced  its programs  as a  result of                                                              
strategic    cuts    targeting   under-enrolled    programs    and                                                              
strengthened  its efforts  to ensure  the success  of students  in                                                              
the remaining programs.                                                                                                         
                                                                                                                                
ACTING   COMMISSIONER  CASHEN   referred   to   slide  12,   which                                                              
identifies  the  challenges  under   the  "workforce  development"                                                              
priority.   He relayed that DETS  is working to replace  its aging                                                              
information  systems  for  employment training  services  and  job                                                              
training  programs   to  improve   services  and  meet   reporting                                                              
requirements of WIOA.                                                                                                           
                                                                                                                                
3:29:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STUTES  asked  for  a clarification  of  "COE"  on                                                              
slide 11.                                                                                                                       
                                                                                                                                
3:29:41 PM                                                                                                                    
                                                                                                                                
PALOMA  HARBOUR,  Director, Division  of  Administrative  Services                                                              
(ASD),  Department  of  Labor  &   Workforce  Development  (DLWD),                                                              
responded  that  "COE"  stands   for  the  [American]  Council  on                                                              
Education (ACE) and is the accrediting body for AVTEC.                                                                          
                                                                                                                                
ACTING  COMMISSIONER  CASHEN  continued   his  discussion  of  the                                                              
challenges  listed  on  slide  12   by  saying  that  the  current                                                              
foundational  system for  employment  services,  the Alaska  Labor                                                              
Exchange  System  (ALEXsys),  is  about  15  years  old,  and  the                                                              
technology  is clunky  and  outdated;  upgrading  the system  will                                                              
enhance the  user experience for  both job seekers  and employers.                                                              
He  stated  that DETS  will  utilize  federal funds,  including  a                                                              
technology  grant, for the  cost associated  with procurement  and                                                              
transition.  He  mentioned that due to a lack  of federal funding,                                                              
there  are  currently  15,000  unprocessed  Work  Opportunity  Tax                                                              
Credit  (WOTC)  applications,  and   some  Alaska  employers  have                                                              
waited for  up to three  years for a response.   He said  that the                                                              
division  is working  diligently  to address  this  issue and  has                                                              
made   some  progress   in   reducing  processing   time   through                                                              
electronic   handling  of   applications.     He  added   that  he                                                              
anticipates   significant    progress   through    automation   of                                                              
processing with addons to the new data systems.                                                                                 
                                                                                                                                
ACTING  COMMISSIONER  CASHEN  stated that  AVTEC  suffered  severe                                                              
water  damage in  August 2017  - two  weeks after  school began  -                                                              
after a  pipe burst in  the dormitory resulting  in a  shutdown of                                                              
38 beds; the  rooms have not yet  been reopened.  He  relayed that                                                              
as  staff work  on  this high  priority  and critical  maintenance                                                              
need,  they  are  unable  to  focus  on  regular  maintenance  and                                                              
operation  projects   or  deferred   maintenance  projects.     He                                                              
mentioned  that  aging underground  fuel  tanks are  beginning  to                                                              
pose a problem for the school and need to be replaced.                                                                          
                                                                                                                                
3:31:53 PM                                                                                                                    
                                                                                                                                
ACTING  COMMISSIONER  CASHEN  referred  to  slide  13  to  address                                                              
legislation related  to the "workforce development"  priority.  He                                                              
stated  that  HB  141,  reauthorizing   the  Technical  Vocational                                                              
Education  Program  (TVEP) for  another  three years,  was  signed                                                              
into law  by the  governor October  2017.  The  chart on  slide 13                                                              
shows how  funds are  distributed among the  TVEP recipients.   He                                                              
pointed  out that  TVEP  funding  has decreased  in  the past  two                                                              
fiscal years,  because as  jobs and wages  in Alaska  decrease, so                                                              
does revenue to the TVEP fund.                                                                                                  
                                                                                                                                
3:32:48 PM                                                                                                                    
                                                                                                                                
ACTING  COMMISSIONER   CASHEN  referred  to  slide   14,  entitled                                                              
"Income  Replacement,"  to  review  the  accomplishments  in  that                                                              
priority  area.    He  stated  that  last  year  the  Division  of                                                              
Workers'  Compensation  (DWC) Special  Investigations  Unit  (SIU)                                                              
investigated  2,400  businesses  and brought  600  employers  into                                                              
compliance  with the  [Alaska] Workers'  Compensation Act  (AWCA).                                                              
He  relayed  that  the  Disability  Determination  Services  (DDS)                                                              
staff  provided   adjudication  of  claims  for   Social  Security                                                              
[Administration]  (SSA) disability benefits;  last year  the staff                                                              
received  a  SSA  deputy  commissioner's   citation  for  thorough                                                              
analysis and responsive  cost estimates.  He stated  that Alaska's                                                              
Unemployment  Insurance   (UI)  program  staff   processed  claims                                                              
totaling  over  $128  million  in UI  benefits  to  nearly  39,000                                                              
claimants.     The  DLWD  also   recovered  over  $5   million  in                                                              
overpayments,  fraudulent claims,  and  penalties, which  protects                                                              
the UI Trust Fund.                                                                                                              
                                                                                                                                
ACTING  COMMISSIONER CASHEN  referred to  the graph  on slide  15,                                                              
entitled  "Percent  of  Initial  Unemployment  Insurance  Payments                                                              
Processed within  21 Days  (exceeded the target  of 87  percent in                                                              
2016)."   He relayed that UI  program staff provided a  high level                                                              
of service  by processing  93.3 percent  of initial claims  within                                                              
21 days, which  is well above the federal timeliness  benchmark of                                                              
87 percent.                                                                                                                     
                                                                                                                                
ACTING COMMISSIONER  CASHEN moved  on to slide  16 to  address the                                                              
challenges  under  the "income  replacement"  priority  area.   He                                                              
relayed that it  will be difficult for the UI  program to maintain                                                              
current  service  levels  because   of  the  high  rate  of  staff                                                              
turnover and  reduction in  federal funding.   He stated  that DDS                                                              
is challenged with  meeting SSA's initial case  clearance goal due                                                              
to a  significant attrition  rate  and hiring  approval.   He said                                                              
that  one  challenge  that  DWC   faces  is  making  the  workers'                                                              
compensation   process  more   efficient   absent  any   statutory                                                              
changes.  He  maintained that improvements could  be realized with                                                              
legislative changes.                                                                                                            
                                                                                                                                
3:34:54 PM                                                                                                                    
                                                                                                                                
ACTING  COMMISSIONER CASHEN  referred  to slide  17  to report  on                                                              
additional related  proposed legislation:   the "Omnibus  Workers'                                                              
Compensation"  legislation, HB 79,  would increase efficiency  and                                                              
flexibility  of  the workers'  compensation  system;  HB 69  would                                                              
repeal the  Workers' Compensation  Appeals Commission  (WCAC); and                                                              
HB 142 would increase the maximum weekly benefit for UI.                                                                        
                                                                                                                                
3:36:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD  asked  for  information  on  the                                                              
high turnover  rate - what  it has been  in the past  couple years                                                              
and how quickly DLWD has been able to fill positions.                                                                           
                                                                                                                                
ACTING COMMISSIONER  CASHEN replied that  he would provide  to the                                                              
committee the information on the entire department.                                                                             
                                                                                                                                
REPRESENTATIVE BIRCH  referred to the 754 DLWD  positions noted on                                                              
slide 4 and  asked for the  vacancy factor and how  the department                                                              
budgets for it.                                                                                                                 
                                                                                                                                
MS.  HARBOUR   answered  that  the   department  does   have  that                                                              
information,  but she did  not come  prepared to  offer it  in the                                                              
present committee meeting.                                                                                                      
                                                                                                                                
3:38:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH suggested  that with a  vacancy factor  of 5                                                              
percent,  the   department  would   budget  for  5   percent  less                                                              
positions.  He asked  to be provided with more  information on the                                                              
LEAP  grant  and  assisting  correctional  facility  inmates  with                                                              
reentry.   He  asked additionally  how the  state integrates  with                                                              
the  contemporary online  recruitment sites,  such as  monster.com                                                              
and craigslist.                                                                                                                 
                                                                                                                                
MS. HARBOUR  responded that the  State of Alaska  recruits through                                                              
its  Workplace Alaska  system; for  difficult  to fill  positions,                                                              
such  as  UI  positions,  the  state  advertises  elsewhere,  like                                                              
craigslist.    She  explained  that  DLWD's  job  exchange  system                                                              
[ALEXsys]  is  opened to  employers  and  job seekers  across  the                                                              
state; the  system is  15 years  old and  needs replacement.   She                                                              
maintained that  the department will be exploring  other solutions                                                              
to best meet employer and job seeker needs.                                                                                     
                                                                                                                                
3:40:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH expressed  his  understanding  that TVEP  is                                                              
[funded by] UI  [taxes] paid by working Alaskans,  and he referred                                                              
to slide  14, which states that  $128 million in UI  benefits were                                                              
paid  to nearly  39,000 claimants.   He  asked whether  the FY  19                                                              
governor's distribution  of $10.9 million represents  UI separated                                                              
from the  total receipts  and reallocated  to different  education                                                              
institutions.                                                                                                                   
                                                                                                                                
ACTING  COMMISSIONER CASHEN  explained  that the  TVEP funds  come                                                              
out of  the employee contribution  to the UI system  before claims                                                              
are  paid; employees  contribute about  27 percent  to the  system                                                              
and employers about  73 percent.  He offered to  provide a diagram                                                              
that illustrates the funding mechanism.                                                                                         
                                                                                                                                
REPRESENTATIVE  BIRCH opined that  the UI should  be used  for the                                                              
benefit of  the employees.   He referred to  slide 4 and  asked if                                                              
$73 million  of the [$147  million] FY  19 budget is  from federal                                                              
grants.                                                                                                                         
                                                                                                                                
ACTING COMMISSIONER CASHEN replied, "That's correct."                                                                           
                                                                                                                                
3:42:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KNOPP  referred  to  slide  13  and  asked  Acting                                                              
Commissioner Cashen  if he attributed the decline  in revenue over                                                              
the four fiscal years to the local economy.                                                                                     
                                                                                                                                
MS. HARBOUR  answered, "Yes,  absolutely."   She explained  that a                                                              
portion  of  the taxable  wage  base  supplies  the fund;  as  the                                                              
number  of   jobs  decline,  the   overall  wage   base  declines;                                                              
therefore, less revenue flows into the fund.                                                                                    
                                                                                                                                
3:43:11 PM                                                                                                                    
                                                                                                                                
CHAIR  KITO  expressed his  belief  that  there is  a  significant                                                              
economist group within  DLWD; he asked whether  that group resides                                                              
in  one  of the  organizational  chart  boxes  or outside  of  the                                                              
chart.                                                                                                                          
                                                                                                                                
ACTING COMMISSIONER  CASHEN identified  the group as  the Research                                                              
and Analysis Section and stated that it was part of ASD.                                                                        
                                                                                                                                
MS.  HARBOUR  explained that  not  all  the  sections are  on  the                                                              
chart;  the  commissioner's  office   and  ASD  supports  all  the                                                              
programs  within  DLWD.    She   relayed  that  the  Research  and                                                              
Analysis Section  primarily provides  labor market information  in                                                              
support of  the workforce development  programs; it  also performs                                                              
AKOSH  statistical  analysis in  support  of the  protect  workers                                                              
program  and   the  UI   actuarial  in   support  of   the  income                                                              
replacement programs.                                                                                                           
                                                                                                                                
3:44:22 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  mentioned that  last year  there was discussion  about                                                              
the  interest  of  the  governor   for  having  additional  agency                                                              
coordination to  identify areas of  common services that  could be                                                              
combined  for  efficiency.   He  asked  if  there is  anything  to                                                              
report from  DLWD with respect to  working with the  Department of                                                              
Education and Early  Development (DEED) or other  agencies to find                                                              
efficiencies.                                                                                                                   
                                                                                                                                
ACTING COMMISSIONER  CASHEN replied  that DLWD works  closely with                                                              
DEED, primarily  with career and technical education;  however, no                                                              
programs have  been merged.   He added  that internally,  DLWD has                                                              
merged two divisions  - the Division of Business  Partnerships and                                                              
the   Employment   Security  Division.      He  added   that   the                                                              
"independent  living"   component  of   DLWD  was  moved   to  the                                                              
Department of Health and Social Services (DHSS).                                                                                
                                                                                                                                
3:45:54 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  referred to discussions  regarding the  possibility of                                                              
overlap  between DLWD,  DEED, and  the University  of Alaska  (UA)                                                              
around workforce  development and regarding  communication between                                                              
those agencies for providing services.                                                                                          
                                                                                                                                
ACTING COMMISSIONER  CASHEN responded  that DLWD does  communicate                                                              
regularly  with UA  primarily to  ensure DLWD  is not  duplicating                                                              
programs.   He expressed his  belief that  DLWD does not  have any                                                              
duplicative  programs   with  DEED.     He  maintained   that  the                                                              
department   is  always   looking   for  efficiencies   and   non-                                                              
duplication of effort.                                                                                                          
                                                                                                                                
3:46:45 PM                                                                                                                    
                                                                                                                                
CHAIR KITO referred  to slide 14, which states that  DLWD has paid                                                              
over $128 million  in UI benefits to nearly 39,000  claimants.  He                                                              
asked whether  DLWD has seen trends  in the numbers of  UI benefit                                                              
claimants.   He asked  whether the  number correlates  directly to                                                              
the unemployment rate or the two vary.                                                                                          
                                                                                                                                
MS. HARBOUR answered  that the UI actuarial staff  of the Research                                                              
and  Analysis   Section  tracks   UI  rates,  claims,   period  of                                                              
payments,  and  a  variety  of other  data  year  after  year;  it                                                              
compares past years  and gives forecasts for future  years; and it                                                              
provides a  monthly report  to UI programs.   She maintained  that                                                              
currently Alaska  has record low UI claims, yet,  the unemployment                                                              
rate is at the  ten-year average.  She said  that the unemployment                                                              
rate  represents people  who are  actively  seeking employment  in                                                              
the  prior  four  weeks;  they  may  no  longer  be  eligible  for                                                              
benefits  or never  have worked.   She  summarized that  currently                                                              
the UI  rates are somewhat  high, and the  UI claims  are somewhat                                                              
low.                                                                                                                            
                                                                                                                                
CHAIR  KITO  asked  if  the  reports can  be  found  on  the  DLWD                                                              
website.                                                                                                                        
                                                                                                                                
MS. HARBOUR  replied that  these detailed reports  are not  on the                                                              
department's  website.    She  said that  the  December  issue  of                                                              
DLWD's  magazine,  Alaska  Economic Trends,  contains  an  article                                                            
that  specifically addresses  the differences  between the  number                                                              
of claims and  the UI rate and  speculates on the reasons  for the                                                              
discrepancy.                                                                                                                    
                                                                                                                                
3:49:07 PM                                                                                                                    
                                                                                                                                
CHAIR KITO inquired  as to DLWD's specific goals  regarding worker                                                              
safety, workforce  development, and income replacement.   He asked                                                              
whether  there have  been  efforts to  identify  annual goals  for                                                              
those priority areas.                                                                                                           
                                                                                                                                
MS. HARBOUR responded  that like every state department,  DLWD has                                                              
performance  measures that  it reports  on  that are  part of  the                                                              
budget  development process.   She  offered that  some goals  were                                                              
mentioned  for the  protect  workers priority.    She stated  that                                                              
DLWD  has  target reduction  percentages  for  transportation  and                                                              
construction   incidence  rates;   DLWD  targeted   a  3   percent                                                              
reduction, but  the actual reduction percentage  was significantly                                                              
higher.   She  continued by  saying  that for  each program  area,                                                              
DLWD  has key  performance indicators;  the graphs  and charts  in                                                              
the PowerPoint illustrate some of these.                                                                                        
                                                                                                                                
3:50:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KNOPP  stated  that   in  the  budgetary  process,                                                              
legislators  have been  asked to  not focus  on personnel  numbers                                                              
for departments  and programs that  are serving the  greater good.                                                              
He  referred  to  HB  255,  which  addresses  the  Certificate  of                                                              
Fitness,  asked if  the intent  is to  benefit the  workers or  to                                                              
raise fees.  He  gave an example:  A few years  ago, DLWD required                                                              
people driving pilot  cars to have flagger certificates.   After a                                                              
two- to  four-hour online  course and  a fee  of $200,  the person                                                              
can drive  a pilot car,  yet there is  nothing in the  course that                                                              
is  applicable  to  driving  a   pilot  car.    He  asked  if  the                                                              
department designs a curriculum applicable to a program.                                                                        
                                                                                                                                
ACTING  COMMISSIONER  CASHEN  responded   that  for  plumbing  and                                                              
electrical work, there  is a Certificate of Fitness  required.  He                                                              
relayed  that since  currently there  is  no way  to enforce  that                                                              
requirement except  through the Alaska Court System  (ACS), HB 255                                                              
would allow a citation to be issued to gain compliance.                                                                         
                                                                                                                                
REPRESENTATIVE   KNOPP   reiterated    his   concern   about   the                                                              
applicability  and necessity  of the course  for certification  of                                                              
pilot car  drivers versus  flaggers.  He  asked if the  department                                                              
considers the applicability of the course.                                                                                      
                                                                                                                                
MS. HARBOUR responded that she would investigate that issue.                                                                    
                                                                                                                                
3:53:31 PM                                                                                                                    
                                                                                                                                
EPRESENTATIVE  WOOL  stated  that  he  hears  from  many  business                                                              
owners with  a concern  for workforce availability  - the  lack of                                                              
people  wanting to  work or  trained to  work.   He mentioned  the                                                              
AVTEC culinary program.   He relayed that hotels  hire hundreds of                                                              
workers, some  seasonally, such  as for  Denali National  Park and                                                              
Preserve,  and  some  in  Fairbanks.   He  maintained  that  these                                                              
workers  are almost  exclusively  hired  from out  of  state.   He                                                              
mentioned  that he  toured a canary  in Kodiak  recently;  many of                                                              
the workers  are not native  to Alaska.   He said that  in certain                                                              
industries,  it is  difficult to  find  good workers.   He  stated                                                              
that many  people come  to Alaska  with J-1 visas  to work  in the                                                              
"box" stores.  He asked if this is an issue that DLWD addresses.                                                                
                                                                                                                                
ACTING  COMMISSIONER  CASHEN  answered  that  it is  an  issue  in                                                              
seafood  processing and  tourism and  reported that  he is  not as                                                              
familiar  with the  retail industry.   He  said that  for many  of                                                              
these jobs,  the underlying  issue is  wages, and  for some  it is                                                              
lack  of skills  and work  ethic  among potential  employees.   He                                                              
maintained  that  the  more  programs  DLWD  has  for  career  and                                                              
technical   education  and  high   school  vocational   education,                                                              
instilling work readiness  and soft skills, the  better off Alaska                                                              
is.  He relayed  that many foreign workers come to  Alaska for the                                                              
seafood  processing industry;  DLWD  is working  on improving  the                                                              
Alaska  hire  efforts  primarily  in  seafood  and  tourism.    He                                                              
offered  that [finding  workers] is  a challenge  even in  some of                                                              
the  industries  requiring  significant  training;  employers  are                                                              
having a  harder time  finding skilled  workers for some  specific                                                              
occupations.                                                                                                                    
                                                                                                                                
3:56:34 PM                                                                                                                    
                                                                                                                                
CHAIR  KITO mentioned  that  HB 255,  the  Certificate of  Fitness                                                              
legislation, is  scheduled to be  heard in the 2/2/18  House Labor                                                              
and Commerce Standing Committee meeting.                                                                                        
                                                                                                                                
3:57:10 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:57 p.m. to 3:59 p.m.                                                                       
                                                                                                                                
3:59:07 PM                                                                                                                    
                                                                                                                                
CHAIR KITO announced  that the next order of business  would be an                                                              
overview  of the  Department  of  Commerce, Community  &  Economic                                                              
Development (DCCED).                                                                                                            
                                                                                                                                
3:59:20 PM                                                                                                                    
                                                                                                                                
MIKE  NAVARRE,  Commissioner  Designee,  Department  of  Commerce,                                                              
Community &  Economic Development  (DCCED), began the  overview by                                                              
referring  to slide  2 of  the PowerPoint  presentation,  entitled                                                              
"Department  Mission."   He  stated  that  DCCED's mission  is  to                                                              
promote  strong communities,  a  healthy economy,  and to  protect                                                              
consumers  in  Alaska;   and  through  that  mission,   DCCED  can                                                              
coordinate,  develop,  and  promote  a sustainable  economy.    To                                                              
fulfill  the  mission, DCCED  has  six  divisions, and  there  are                                                              
seven  corporate  entities  under  its umbrella.    The  corporate                                                              
entities are  as follows:   Alaska Energy Authority  (AEA); Alaska                                                              
Industrial  Development  and  Export   Authority  (AIDEA);  Alaska                                                              
Seafood  Marketing  Institute  (ASMI);  Regulatory  Commission  of                                                              
Alaska  (RCA);  Alaska  Gasline  Development  Corporation  (AGDC);                                                              
Alcohol and Marijuana  Control Office (AMCO); and  Alaska Railroad                                                              
Corporation  (ARRC).   He added  that  these entities  are in  the                                                              
department's budget;  he has some oversight over  their management                                                              
but very little control.                                                                                                        
                                                                                                                                
COMMISSIONER NAVARRE  relayed that  DCCED touches virtually  every                                                              
Alaskan  through  insurance  banking,  and  it  issues  about  225                                                              
licenses  -  one-third  corporate, one-third  business,  and  one-                                                              
third professional.  The department has a strong, well-                                                                         
functioning   regulatory  framework,   which   is  essential   for                                                              
economic development and for protecting Alaskans.                                                                               
                                                                                                                                
4:02:01 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  NAVARRE  referred  to slide  3,  entitled  "Economic                                                              
Growth,"  and reported  that economic  growth  and opportunity  is                                                              
the future  of Alaska's economy.   He stated  that DCCED  has just                                                              
completed  phase   one  of  its  Community   Economic  Development                                                              
Strategy (CEDS)  for Alaska.  He  indicated it was the  first time                                                              
that  a comprehensive  strategy  had  been  put together  in  this                                                              
fashion; it's  designed to transcend  administrations and to  be a                                                              
workable  tool and  strategy  for  the long-term  in  Alaska.   He                                                              
added  that the  process  began with  many  hearings in  different                                                              
areas  of the  state; there  was representation  from all  regions                                                              
and participation  from all  sectors within  a steering  committee                                                              
as the  plan was  developed.   He maintained  that  the plan  is a                                                              
high-level  view.   The second  phase will  involve narrowing  the                                                              
plan,  focusing in  on actionable  items coming  out of the  broad                                                              
economic development  strategy, and looking at ways  to employ the                                                              
actionable items.                                                                                                               
                                                                                                                                
COMMISSIONER NAVARRE  relayed that AIDEA's mission  is to promote,                                                              
develop,  and  advance  economic  growth  and  diversification  in                                                              
Alaska through  various financing tools.   In 2017,  AIDEA's loans                                                              
and  investments  were  more  than  $116  million,  leveraging  an                                                              
additional $36 million  in private sector financing,  and paying a                                                              
$12.8  million  dividend to  the  state  general  fund (GF).    He                                                              
offered  that the  accumulative  total of  the  dividend over  the                                                              
past  20 years  is  $392 million;  that  is based  on  significant                                                              
investment in AIDEA by the state.                                                                                               
                                                                                                                                
COMMISSIONER  NAVARRE stated  that to promote  a healthy  economy,                                                              
DCCED has 280  loans totaling $37 million across  11 loan programs                                                              
to  Alaska  owned  businesses,   including  $150  million  in  the                                                              
Commercial   Fishing  Revolving   Loan   Fund   (CFRLF);  it   has                                                              
partnerships  with  the  University  of  Alaska  (UA)  to  support                                                              
resource  development  efforts and  to  develop new  industry  and                                                              
manufacturing  through  Made in  Alaska  and the  Alaska  Products                                                              
Preference Program.                                                                                                             
                                                                                                                                
4:04:22 PM                                                                                                                    
                                                                                                                                
COMMISSIONER NAVARRE  relayed that although no GF  dollars support                                                              
ASMI in  this year's  budget, ASMI  is responsible nationally  for                                                              
about 99,000  full-time equivalent  jobs,  $5.2 billion in  annual                                                              
labor  income,  and  about  $12.8 billion  economic  output.    In                                                              
Alaska,  ASMI  is  a  significant   contributor  to  the  economy;                                                              
internationally, it is important as well.                                                                                       
                                                                                                                                
4:05:01 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  NAVARRE referred  to slide  4, entitled  "Affordable                                                              
Energy,"   which  highlights   the   Alaska  Gasline   Development                                                              
Authority  (AGDA), AEA,  and  Administrative Order  No.  272.   He                                                              
stated  that  AEA's  mission  is  to reduce  costs  of  energy  in                                                              
Alaska;  DCCED is  working  to accomplish  that  in  a variety  of                                                              
ways, including  some legislative  initiatives to ensure  that all                                                              
areas  of  Alaska  are  benefitted.    He  related  that  AGDC  is                                                              
continuing  its  work advancing  a  gasline  with the  signing  of                                                              
high-level agreements  in Asia,  including China, Japan,  and [the                                                              
Republic of] Korea.                                                                                                             
                                                                                                                                
COMMISSIONER   NAVARRE  stated   that  [Governor  Bill   Walker's]                                                              
Administrative  Order 272  directed continuing  focus on  consumer                                                              
energy  generally  and  the  Interior   electric  energy  projects                                                              
specifically.  He  mentioned that the work continues;  last month,                                                              
AIDEA  moved  forward  the  sale  of  Pentex  Alaska  Natural  Gas                                                              
Company ("Pentex")  to the Interior Gas Utility  (IGU); the intent                                                              
is to  deliver gas  energy to Fairbanks.   He  added that  the new                                                              
executive  director  of  AEA,  Janet Reiser,  is  a  former  board                                                              
member  of  Chugach  Electric  Association,   Inc.  (CEA)  and  is                                                              
working  to narrow  AEA's  focus  as the  state's  lead agency  on                                                              
energy policy.   He cited, as example, using the  interties of the                                                              
Bradley Lake  Power Project  (BLPP) to  continue fostering  better                                                              
relationships and  efficiencies among all the  Railbelt utilities.                                                              
He  mentioned that  there are  projects in  the governor's  budget                                                              
this year; Kake's  [Gunnuk Creek] hydroelectric project  is in the                                                              
governor's  budget; and Power  Cost Equalization  (PCE) serves  88                                                              
utilities and over 83,000 people in 195 communities.                                                                            
                                                                                                                                
4:07:03 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  NAVARRE  moved  on  to  slide  5,  entitled  "Strong                                                              
Communities,"  and mentioned that  Community and Regional  Affairs                                                              
used to be a  department, but now is a division  within DCCED.  It                                                              
is enshrined  in the  Alaska Constitution  and established  by law                                                              
in the  executive branch  to advise  and assist local  government.                                                              
He  stated that  DCCED  is the  local  government  entity for  the                                                              
unincorporated areas  of Alaska.  He relayed that  there are seven                                                              
Division of Community  and Regional Affairs (DCRA)  offices across                                                              
the  state  -  Kotzebue,  Nome,   Bethel,  Dillingham,  Anchorage,                                                              
Juneau, and Fairbanks;  there are 30 local  government specialists                                                              
that  support local  governments  in  the areas  represented;  the                                                              
support  includes utilities,  elections,  ordinances,  and a  wide                                                              
variety of training  and other services.  He added  that DCRA also                                                              
has responsibility  for the  Municipal Land  Trustee Program.   He                                                              
mentioned  the  community  resources that  DCRA  makes  available:                                                              
community  online   database;  interactive  community   maps;  and                                                              
community  status  reports  measuring seven  indicators  over  500                                                              
communities in Alaska.                                                                                                          
                                                                                                                                
4:08:10 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  NAVARRE referred  to slide  6, entitled  "Protecting                                                              
Consumers,"  and relayed  that $13 million  is generated  annually                                                              
by  securities  registration and  filing  fees.   He  stated  that                                                              
DCCED is  the sole  registry for  Alaska Native Claims  Settlement                                                              
Act (ANCSA) corporation  proxy filing.  They are  not regulated by                                                              
the  U.S. Securities  and  Exchange Commission  (SEC);  therefore,                                                              
DCCED exercises oversight.                                                                                                      
                                                                                                                                
COMMISSIONER NAVARRE  stated that  the Corporations,  Business and                                                              
Professional Licensing  Section performs the  following functions:                                                              
processes business  licenses and  tobacco endorsements;  registers                                                              
corporate   compliance,   reporting,  and   trademarks;   licenses                                                              
professionals;  supports  professional  boards;  and  responds  to                                                              
public complaints  regarding  violations of  licensing.   He added                                                              
that  all are  funded  by designated  general  funds (DGF)  rather                                                              
than  UGF.    He  maintained  that  DCCED  is  asked  to  regulate                                                              
corporation, business,  and professional  licensing for  a variety                                                              
of   reasons,   including  public   protection   and   maintaining                                                              
standards in the  industry; therefore, these entities  have agreed                                                              
to pay  for the cost  of the board  and oversight provided  by the                                                              
state.                                                                                                                          
                                                                                                                                
COMMISSIONER  NAVARRE   mentioned  that  the  DCCED   Division  of                                                              
Insurance  has been nationally  recognized  for its adaptive  work                                                              
in the individual  market for health insurance; Alaska  was one of                                                              
only three  states whose rate decreased  this year, which  was due                                                              
to Alaska's Section 1332 Innovation waiver.                                                                                     
                                                                                                                                
COMMISSIONER  NAVARRE  relayed  that  AMCO  includes  the  Alcohol                                                              
Beverage Control  Board and the Marijuana Control  Board; although                                                              
the  office  is  within  DCCED,  the director  of  the  office  is                                                              
answerable  to the  two boards.   He  offered that  he works  with                                                              
that office to have good communication and provide oversight.                                                                   
                                                                                                                                
COMMISSIONER NAVARRE  stated that  RCA regulates public  utilities                                                              
and  the regulatory  assistance  project  (RAP)  to try  to  lower                                                              
costs; an  example is  the effort to  encourage improved  and more                                                              
efficient  functioning   of  the   utility  cooperatives   in  the                                                              
Railbelt.                                                                                                                       
                                                                                                                                
4:11:15 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  NAVARRE  moved on  to  slide  7, entitled  "Title  4                                                              
Rewrite," and  relayed that Title  4 of the Alaska  Statutes dates                                                              
to  the  1980s;  it  needs  updating   and  streamlining;  Senator                                                              
Micciche  has  introduced  SB 76  and  a  variety of  other  bills                                                              
addressing it;  it involves  distilleries, breweries,  and alcohol                                                              
and  marijuana oversight.    He stated  that  DCCED's approach  to                                                              
these  issues   is  that   there  are   competing  interests   and                                                              
historical issues;  DCCED will identify the issues,  listen to all                                                              
sides, and  try to build consensus;  it will attempt to  develop a                                                              
framework in  the alcohol laws that  will allow for  efficient and                                                              
effective oversight  and management, yet  one that can  adapt over                                                              
time as things change in Alaska.                                                                                                
                                                                                                                                
COMMISSIONER NAVARRE  continued with slide 8,  entitled "Statewide                                                              
Economic    Development   Strategy,"    to   describe    "Northern                                                              
Opportunity: Alaska's  Economic Strategy."  It is  a strategy that                                                              
builds  on  past,  local,  and  regional  efforts;  U.S.  Economic                                                              
Development Administration  (EDA) funds were used  for the effort,                                                              
and  they  were  matched  by  the  funding  of  personnel  in  the                                                              
Division of Economic Development (DED).                                                                                         
                                                                                                                                
COMMISSIONER    NAVARRE   referred    to    slide   9,    entitled                                                              
"Administrative  Order 289 - Climate  Change," and  explained that                                                              
the order  is the governor's initiative.   The focus areas  are as                                                              
follows:   mitigation - actions  to reduce, sequester,  and offset                                                              
greenhouse gas emissions;  adaptation - actions to  evaluate risks                                                              
and  adopt measures  to  address or  reduce  the vulnerability  of                                                              
Alaska's  citizens; and research  - responses  for identified  and                                                              
emerging problems.   These  three focus  areas will be  considered                                                              
in  the context  of climate  change  and its  effect  on areas  of                                                              
Alaska including coastal areas.                                                                                                 
                                                                                                                                
4:14:06 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  NAVARRE turned  to slide  10, entitled  "Reinsurance                                                              
and the  1332 Waiver," and reported  that the waiver  represents a                                                              
$332  million  federal  funding   "home  run."    The  legislature                                                              
appropriated $110 million  as a match; the first  $55 million came                                                              
from GF and funded  the program; the second $55  million came from                                                              
premium taxes in  the insurance industry.  He  mentioned that Lori                                                              
Wing-Heier,  Director,  Division   of  Insurance,  and  her  staff                                                              
deserve credit  for securing  the waiver;  it is very  innovative;                                                              
it  was nationally  recognized;  it  resulted in  stabilizing  the                                                              
private  insurance  market and  contributed  to the  reduction  in                                                              
health insurance  individual markets rates this year.   He offered                                                              
to provide  more information on the  waiver.  He stated  that with                                                              
federal funding,  Alaska has  an opportunity  to reduce  the state                                                              
contribution;  DCCED  is  seeking  to  quantify  the  savings  for                                                              
finance committee review.                                                                                                       
                                                                                                                                
4:15:46 PM                                                                                                                    
                                                                                                                                
COMMISSIONER    NAVARRE   referred    to   slide   11,    entitled                                                              
"Streamlining   Professional  Licensure,"   and  relayed   that  a                                                              
strategic   plan  was  instituted   by  DCCED   that  focuses   on                                                              
streamlining  the  professional  licensure  process  and  ensuring                                                              
that  applications are  processed  as quickly  as  possible.   The                                                              
initial response  from the  department has  been the reduction  in                                                              
[process]  time  from  the  receipt of  the  application  and  the                                                              
initial response  from more than  60 days to  under 30 days.   For                                                              
medical  licensure  for  physicians,   physician  assistants,  and                                                              
nurses,  the time  is  down to  within ten  days  for the  initial                                                              
review  and  status  report.   He  mentioned  that  Senator  Cathy                                                              
Giessel  introduced   SB  108,   which  would  allow   for  faster                                                              
licensure  for applications  without  an  answer  of "yes,"  which                                                              
could  be  indicative  of  investigations,  probations,  or  other                                                              
problems with the application.                                                                                                  
                                                                                                                                
COMMISSIONER NAVARRE  moved on to  slide 12, entitled  "Production                                                              
Forecast," and  offered that he  accepted his position  because he                                                              
wished  to formulate  an economic  message.   He  referred to  the                                                              
graph  on slide  12, entitled  "ANS [Alaska  North Slope]  History                                                              
and Forecast  by Pool," which  illustrates the basis  for Alaska's                                                              
economic challenge:   even with new oil fields, Alaska  is at best                                                              
stemming  the rate  of  decline.   He offered  that  to attain  an                                                              
incline  in  the   production  rate,  significant   investment  is                                                              
needed; this  calls for a  comprehensive fiscal and  economic plan                                                              
allowing for  stability in the  oil tax structure  and recognizing                                                              
the  cost of  economic development  in areas  of Alaska's  economy                                                              
other than oil and gas.                                                                                                         
                                                                                                                                
4:17:50 PM                                                                                                                    
                                                                                                                                
COMMISSIONER NAVARRE  continued with slide 13,  entitled "Economic                                                              
Impact of  Growth," to  present a  scenario of  5,000 new  jobs in                                                              
the  Fairbanks North  Star Borough  (FNSB):   Of  the 5,000  jobs,                                                              
4,000 would require  an influx of workers; 1,000 of  them would be                                                              
absorbed  within the  FNSB.   This  would represent  a $1  billion                                                              
capital investment;  it would include 4,000 new  households, 2,500                                                              
new  students in  the  school district,  4,000  new housing  units                                                              
with  an  average  value  per  home  of  $200,000.    Commissioner                                                              
Navarre said that  he chose a limited liability  company (LLC) for                                                              
the scenario,  because currently  LLCs are  not taxable  under the                                                              
state's tax  structure.  He pointed  out that under  the scenario,                                                              
there  would  be  an  additional   $22  million  in  property  tax                                                              
revenues  at the  local level  and  $10 million  in new  education                                                              
expenses,   which  leaves   $12  million   for  roads,   emergency                                                              
services, social  services, and  other needs.   He concluded  that                                                              
the cost  of delivering  the services  that go  with the  economic                                                              
development are covered  by the local taxes.  He  pointed out that                                                              
at the state  level there would  be 5,000 new jobs created  and no                                                              
new  revenues,  yet the  state  pays  two-thirds  of the  cost  of                                                              
education,  all of  the  ACS costs,  and the  bulk  of the  public                                                              
safety  costs;  therefore,  there   would  be  an  additional  $30                                                              
million  in  expenses associated  with  the  economic  development                                                              
described in  the scenario, and no  new revenues to pay  the costs                                                              
associated with it.                                                                                                             
                                                                                                                                
COMMISSIONER  NAVARRE relayed  that he has  modeled this  scenario                                                              
in other  areas of the state,  including the Kenai  Peninsula, and                                                              
discovered  that  local  governments  have  a  broader  tax  base,                                                              
therefore,  are  able  to  pay   the  costs  associated  with  the                                                              
economic development,  but the state does not.   He concluded that                                                              
there are  tremendous economic  opportunities available  in Alaska                                                              
and for  its citizens;  Alaska wants  to take  advantage of  these                                                              
opportunities; however,  there are associated costs  which must be                                                              
built  into the model  so that  the tax  structure is  predictable                                                              
and  stable  for those  making  the  investments.   He  said  that                                                              
without  building those  costs into  the model,  from an  economic                                                              
perspective,  there is  a disincentive  to  investment in  Alaska.                                                              
He offered  that his intent is to  foster a long-term  look at the                                                              
economy as a basis  for building the fiscal regime,  rather than a                                                              
short-term discussion about taxes.                                                                                              
                                                                                                                                
4:20:46 PM                                                                                                                    
                                                                                                                                
CHAIR   KITO  asked   for   clarification   that   on  slide   13,                                                              
Commissioner  Navarre has  indicated  the  consequences of  adding                                                              
5,000 new  jobs to  FNSB through  an economic development  project                                                              
or circumstance.                                                                                                                
                                                                                                                                
COMMISSIONER NAVARRE  agreed.  He added that if the  jobs were oil                                                              
and gas jobs, then  the jobs would bring in more  revenue than the                                                              
costs  associated  with the  jobs;  however,  the scenario  is  an                                                              
investment  like for a  widget factory  or a manufacturing  plant.                                                              
The  intent  of  the  scenario is  to  demonstrate  the  costs  of                                                              
economic  development in  the short-term  and in the  longer-term.                                                              
Alaska's  fields are  mature  fields; Prudhoe  Bay  Oil Field  was                                                              
discovered  in 1969;  the peak  of  oil production  in Alaska  was                                                              
1988; Alaska  would like to have  those production levels,  but it                                                              
would require  significant  investment in  Alaska.  He  maintained                                                              
that even  with additional investment,  Alaska will be  faced with                                                              
a transition  to a different type  of economy at some  point and a                                                              
broader tax burden.                                                                                                             
                                                                                                                                
COMMISSIONER  NAVARRE  commented that  the  picture  of a  blanket                                                              
toss on slide 14  signifies the celebration of a  whaling crew for                                                              
a  successful hunt  and  a leap  of faith,  which  is what  Alaska                                                              
needs to do to  take advantage of opportunities  and structure its                                                              
economic foundations to take advantage of them.                                                                                 
                                                                                                                                
4:22:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   BIRCH  referred   to   slide  6,   "Corporations,                                                              
Business   &  Professional   Licensing,"  and   stated  that   the                                                              
legislature  has   had  issues   allocating  to  flat   rates;  it                                                              
struggled  last  year  with  "cost  cause  or  cost  payer."    He                                                              
suggested  Alaska  reasonably  align  the  cost  of  licenses  and                                                              
renewals to the cost of providing the license.                                                                                  
                                                                                                                                
REPRESENTATIVE  BIRCH   mentioned  the  Title  4   rewrite  as  it                                                              
pertains  to licensing.    He said  that  he  has constituents  in                                                              
Anchorage and  friends in  Fairbanks that operate  microbreweries;                                                              
he is  concerned about  the "hard  line" on  the industry  and the                                                              
squabbles  about   what  is  permissible.    He   maintained  that                                                              
microbreweries are  good for the  economy; these  small businesses                                                              
are employing people;  Napa Valley is very successful;  and Alaska                                                              
has  an   opportunity  to  be   successful  in  the   microbrewery                                                              
industry.                                                                                                                       
                                                                                                                                
REPRESENTATIVE BIRCH  referred to slide 13 and  maintained that if                                                              
the 5,000  jobs in  the scenario  were in  the mining industry  or                                                              
oil and  gas industry, the  workers would be contributing  revenue                                                              
to the state  times ten; if the  jobs are in the  retail industry,                                                              
not so much.   He emphasized  that Alaska's long suit  is resource                                                              
development,  Alaska  should  focus on  resource  development  and                                                              
attract jobs in those industries.                                                                                               
                                                                                                                                
4:25:41 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  NAVARRE  responded   that  in  respect  to  Title  4                                                              
rewrite,  he  has  been  immersed   in  many  aspects  of  it;  he                                                              
understands  the  issues  and  recognizes   that  there  are  many                                                              
competing economic  interests and  an irrational adherence  to the                                                              
status  quo.    He  maintained   that  DCCED  will  try  to  build                                                              
consensus,  apply pressure  where its  needed, ensure  that it  is                                                              
structured so  that it can  be effectively managed,  and recognize                                                              
changing dynamics in the industry.                                                                                              
                                                                                                                                
COMMISSIONER NAVARRE  commented that  in respect to  economics, he                                                              
wholly   agrees   that   Alaska  needs   to   encourage   resource                                                              
development in  Alaska.  He  added that  the oil and  gas industry                                                              
brings  in more  revenue than  the  costs it  incurs; however,  he                                                              
expressed that  he is not  sure that is  the case with  the mining                                                              
industry.  He maintained  that what is not built  into slide 13 is                                                              
the multiplier effect  that goes along with any  economic activity                                                              
- service  industry jobs and other  lower level jobs  that require                                                              
but don't pay for  state services.  He recommended  taking a broad                                                              
look  at  Alaska's  economy;  finding   areas  of  agreement;  and                                                              
building an economic plan that recognizes different aspects.                                                                    
                                                                                                                                
4:27:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KNOPP referred to  ASMI on  slide 3 and  mentioned                                                              
the decision last  year to close the Seattle  office and relocate.                                                              
He asked if that occurred.                                                                                                      
                                                                                                                                
COMMISSIONER NAVARRE  expressed his belief that the  employees are                                                              
still  in transition,  and  almost  all have  moved  to Juneau  in                                                              
renovated space on  Franklin Street.  He stated that  he is an ex-                                                              
officio  member  of  the  ASMI  board;  attended  the  last  board                                                              
meeting;  and was impressed  with  the level  of interest  and the                                                              
sincere  approach of  the  ASMI  board to  the  issues facing  the                                                              
seafood industry.                                                                                                               
                                                                                                                                
REPRESENTATIVE   KNOPP  mentioned   that  he   has  gotten   calls                                                              
regarding  the  relocation of  the  office  to Juneau  instead  of                                                              
Anchorage;  the  callers  felt   that  Anchorage  was  the  better                                                              
location for marketing.                                                                                                         
                                                                                                                                
REPRESENTATIVE  KNOPP referred  to slide  5, which  read in  part,                                                              
"An agency  shall be  established by law  in the executive  branch                                                              
of the  state government to  advise and assist local  government."                                                              
He asked  if that is in  place or will  happen in the future.   He                                                              
mentioned that he is not aware of that happening.                                                                               
                                                                                                                                
CHAIR  KITO  responded   that  the  agency  referenced   is  DCRA,                                                              
formerly the  Department of  Community and  Regional Affairs.   He                                                              
responded  to  the question  regarding  ASMI  by saying  that  the                                                              
staff transition  schedule indicates that they are  completely out                                                              
of the Seattle office; the state's lease ends on June 30, 2018.                                                                 
                                                                                                                                
4:29:47 PM                                                                                                                    
                                                                                                                                
CHAIR  KITO referred  to  slide  9, regarding  the  Administrative                                                              
Order  289  on climate  change,  and  commented that  he  recently                                                              
heard the  following statistic:   in  2016, national disasters  in                                                              
the U.S.  cost the  country $80  billion; in  2017, with  multiple                                                              
natural disasters  - hurricanes,  fires, floods, and  landslides -                                                              
it is estimated  the cost will be $306 billion; this  is a greater                                                              
than 300 percent  increase.  He expressed that this  is a concern,                                                              
and  it  indicates to  him  that  climate  change will  become  an                                                              
economic  issue.  He  said that  he worries  about the  additional                                                              
economic  burden this  will have  on Alaska  either for  insurance                                                              
costs or  for actual  expenses dealing  with natural disaster,  as                                                              
Alaska is the front line of climate change.                                                                                     
                                                                                                                                
COMMISSIONER  NAVARRE  replied   that  the  rationale  behind  the                                                              
administrative  order  was to  recognize  and identify  where  the                                                              
impacts  may  manifest  and  how  best  to deal  with  them.    He                                                              
maintained it  will be an economic  issue.  He asserted  that even                                                              
if it  is impossible  to definitively name  the cause  for climate                                                              
change,  the   fact  that   it  is   happening  is  known;   ocean                                                              
acidification  will  have  far reaching  impacts  on  the  seafood                                                              
industry  in Alaska;  and the coastal  areas  will be impacted  as                                                              
well.                                                                                                                           
                                                                                                                                
4:32:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   WOOL   referred   to   the   Statewide   Economic                                                              
Development Strategy  and the Northern Opportunity on  slide 8 and                                                              
asked what division oversaw that effort.                                                                                        
                                                                                                                                
COMMISSIONER  NAVARRE   explained  that  the   Statewide  Economic                                                              
Development  Strategy  is  a  high-level  view  identifying  areas                                                              
needing  attention;   it  is  under   the  Division   of  Economic                                                              
Development; it  was funded  by the federal  EDA grant; and  it is                                                              
available on the DCCED website.                                                                                                 
                                                                                                                                
4:33:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  referred the graph  on Slide 12,  showing oil                                                              
production history  and forecast, and asked whether  the intent of                                                              
the  graph is  to  show  the downward  trend  and  to convey  that                                                              
absent a  major oil  find, Alaska  will need to  adjust to  a "new                                                              
mindset."                                                                                                                       
                                                                                                                                
COMMISSIONER  NAVARRE  answered  that the  graph  illustrates  two                                                              
simultaneous  circumstances:   the first  circumstance relates  to                                                              
the aging  oil fields and the  attempt to stem the  decline, which                                                              
could be precipitous;  the second relates to new  fields that have                                                              
been  identified and  will  hopefully be  developed  over time  to                                                              
increase  production.   The projections  are  about merging  those                                                              
two conditions.   He added there are some very  promising finds on                                                              
the  North Slope,  but development  takes billions  of dollars  in                                                              
investment.   He  said that  to encourage  the investment,  Alaska                                                              
must have  some stability  and be  welcoming  to development.   He                                                              
maintained  that to  gain  that stability  for  the oil  industry,                                                              
either  the  burden must  be  shared,  or  the oil  industry  will                                                              
disproportionately  bear the burden.   He asserted that  a broader                                                              
foundation for Alaska is in its best interest.                                                                                  
                                                                                                                                
4:34:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KNOPP  referred   to  a  letter  from  the  Alaska                                                              
Conference  of  Mayors  requesting  a  stable  fiscal  plan.    He                                                              
asserted  that  Alaska  currently  does  not  have  the  means  to                                                              
support all the  requests in the letter.  He offered  that most of                                                              
the  organized cities  have  "stepped up  to  the plate,"  adopted                                                              
city powers,  and provided  services; however,  boroughs  have not                                                              
adopted the powers  and provided the services.   He suggested that                                                              
if  legislators and  Alaska residents  refuse to  adopt a  revenue                                                              
plan, at some point  it may be appropriate to ask  the boroughs to                                                              
organize,  adopt the  powers, and  provide the  services they  are                                                              
requesting from the state.                                                                                                      
                                                                                                                                
4:36:20 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  NAVARRE  responded  that  Alaska  has  economies  of                                                              
scale  that are  unique;  therefore, Alaska  has  services at  the                                                              
state level  that other  states provide  at the  local level.   He                                                              
referred  to  police  coverage  and  said  that  Alaska  providing                                                              
coverage to the  boroughs through the Alaska  State Troopers (AST)                                                              
has  worked for  a long  time.   He  maintained  that by  statute,                                                              
adopting  those powers  must be  by a  public vote.   He  asserted                                                              
that  there  is  significant cost  associated  with  assuming  the                                                              
powers; it  is difficult to get  people to pay for  something even                                                              
when  they recognize  the  need.   He said  that  it behooves  the                                                              
state  to have  the discussion  with  local governments  regarding                                                              
the  balance between  what  the  state should  be  doing and  what                                                              
local government should be doing.                                                                                               
                                                                                                                                
COMMISSIONER  NAVARRE  continued by  saying  that  the history  of                                                              
boroughs in  Alaska is that many  were forced to form  through the                                                              
Mandatory Borough  Act of [1963];  Alaska has many  service areas,                                                              
some  with a  larger tax  base than  others.   He maintained  that                                                              
some service  areas worked  well at the  time they were  designed,                                                              
but  as they  have evolved,  the  statutes have  not evolved  with                                                              
them.    He  offered   that  the  state  needs  to   take  a  more                                                              
comprehensive  view of  how state  and local  governments work  in                                                              
Alaska;  DCCED will  attempt to  do that in  conjunction with  the                                                              
economic  plan.   He  maintained  that Alaska  gravitates  towards                                                              
solutions on an  individual basis; once they are  in place, Alaska                                                              
has  little "fiefdoms"  that  become very  parochial  and make  it                                                              
difficult  to deviate  from the  status  quo, even  if an  overall                                                              
solution is  better.  He  said that the  statutes are  designed in                                                              
some  ways to  limit that;  as an  example, service  areas -  fire                                                              
service areas  and recreation service  areas - can't  be combined,                                                              
even if the local  governing body supports it.   Residents of each                                                              
individual service  area must vote separately to  accomplish that,                                                              
which  is an  impediment at  times  to efficiencies.   He  offered                                                              
that for some  of these issues, it  takes a long time  and a great                                                              
deal of  work to convince  and educate  the public about  the best                                                              
way to  go forward.   All these issues  will be controversial  and                                                              
contentious.                                                                                                                    
                                                                                                                                
4:39:15 PM                                                                                                                    
                                                                                                                                
CHAIR  KITO concurred  with  Commissioner  Navarre's statement  of                                                              
the  issue and  expressed  that  he wishes  to  invite the  Alaska                                                              
Municipal League  (AML) to the  committee to address  state versus                                                              
municipal  responsibilities  for   services.    He  suggested  the                                                              
commissioner  or DCRA  staff would  be willing  to participate  in                                                              
that discussion.                                                                                                                
                                                                                                                                
4:40:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH  expressed that he has been  heavily immerged                                                              
in this issue  with six years of experience with  local government                                                              
in Fairbanks  and nine years  in Anchorage.   He opined  that when                                                              
the constitution  was drafted, the  boroughs were  not contiguous;                                                              
therefore,  there were  wide open  spaces in  Alaska.  He  offered                                                              
his understanding  that the legislature serves as  an assembly for                                                              
the  unorganized  borough  areas;  the  legislature  is  empowered                                                              
under  the constitution  to do  whatever is  necessary to  provide                                                              
the  governance and  take  necessary action.    He suggested  that                                                              
there  is a  mechanism in  place, but  it has  not been  exercised                                                              
very often.                                                                                                                     
                                                                                                                                
COMMISSIONER  NAVARRE agreed that  there is  a mechanism  in place                                                              
for the  unincorporated areas; however,  many of  the incorporated                                                              
areas  also  evolved  over  time  - the  areas  were  expanded  or                                                              
combined.    This  was  accomplished  at  times  by  combining  or                                                              
overlaying existing  structures:  in  Anchorage there is  a police                                                              
service  area   and  areas  outside   the  police   service  area,                                                              
including  the  highway  corridor,  which  is  the  main  arterial                                                              
between  Kenai  and  Anchorage.    He said  that  last  year,  the                                                              
legislature passed  a bill under which the state  formed a highway                                                              
corridor service  area on the  Kenai Peninsula, because  there was                                                              
a recognized need;  the communities' emergency services  wanted to                                                              
serve  their local  communities but  were spending  most of  their                                                              
time with  people passing through  on the corridor.   He mentioned                                                              
that Cooper  Landing was the area  he was referencing.   He stated                                                              
that there are many challenges in Alaska.                                                                                       
                                                                                                                                
4:42:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  suggested that if the  legislature wants                                                              
to reform  the power  of boroughs to  insist they provide  certain                                                              
services  and  move  those  services to  the  boroughs,  it  would                                                              
consume  the entire  session and  involve a  slate of  bills.   He                                                              
asked if his assessment is correct.                                                                                             
                                                                                                                                
COMMISSIONER  NAVARRE  replied,  "You're  absolutely right."    He                                                              
maintained that it  is a complex set of issues; it  should be done                                                              
through   dialog,   communication,   and  consensus   with   local                                                              
governments,   because   otherwise  there   would   be  too   many                                                              
obstacles.                                                                                                                      
                                                                                                                                
4:43:17 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  referred to  slide 12, the  ANS history  and forecast,                                                              
and related  the following  experience:  he  was working  near the                                                              
Kaparic River Oil  Field at the time it was under  development; it                                                              
was very exciting,  even though it was significantly  smaller than                                                              
the  Prudhoe Bay  oil  discovery;  it was  the  last  big find  in                                                              
Alaska.    There is  potential  with  the  opening of  the  Arctic                                                              
National  Wildlife   Refuge  (ANWR);   there  is  potential   with                                                              
exploration  of  the  former  National   Petroleum  Reserve-Alaska                                                              
(NPR-A);  however, no  concrete  large amounts  of  oil have  been                                                              
discovered.   He  opined  that being  hopeful  is  good but  being                                                              
practical is  also good, that  is, to make  sure Alaska has  a way                                                              
to  move forward.    He suggested  that  if Alaska  finds  another                                                              
large oil  reserve, it should approach  it like Norway  has done -                                                              
ensure  services are  provided,  then bolster  the permanent  fund                                                              
with the excess revenue the state receives.                                                                                     
                                                                                                                                
4:46:14 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being  no further business  before the committee,  the House                                                              
Labor and  Commerce Standing  Committee meeting  was adjourned  at                                                              
4:46 p.m.                                                                                                                       

Document Name Date/Time Subjects
HLAC DOLWD Overview 1.24.18.pdf HL&C 1/24/2018 3:15:00 PM
Dept. of Labor Overview
HLAC DCCED Overview 1.24.18.pdf HL&C 1/24/2018 3:15:00 PM
Dept. of Commerce