Legislature(2017 - 2018)BARNES 124

02/21/2018 03:15 PM LABOR & COMMERCE

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Audio Topic
03:21:05 PM Start
03:22:24 PM Presentation: Economic Trends & Entrepreneurship in Alaska
04:40:44 PM HB306
04:48:01 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Presentation: Economic Trends & Entrepreneurship
in AK by:
- Dan Robinson, Chief of DOLWD Research &
Analysis
- Dr. Mouhcine Gouttabi, Assistant Professor of
Economics, ISER
- John Bittner, Exec. Dir., UAA AK Small
Business Development Center
+= HB 306 PERS/TERS DISTRIBUTIONS TELECONFERENCED
Moved HB 306 Out of Committee
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                       February 21, 2018                                                                                        
                           3:21 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                                                                                                            
                                                                                                                                
PRESENTATION: ECONOMIC TRENDS & ENTREPRENEURSHIP IN AK                                                                          
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 306                                                                                                              
"An  Act  relating  to  disbursement  options  under  the  Public                                                               
Employees'  Retirement   System  of  Alaska  and   the  Teachers'                                                               
Retirement  System  of Alaska  for  participants  in the  defined                                                               
contribution plan; and providing for an effective date."                                                                        
                                                                                                                                
     - MOVED HB 306 OUT OF COMMITTEE                                                                                            
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 306                                                                                                                  
SHORT TITLE: PERS/TERS DISTRIBUTIONS                                                                                            
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
01/24/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/24/18       (H)       L&C, FIN                                                                                               
02/12/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/12/18       (H)       Heard & Held                                                                                           
02/12/18       (H)       MINUTE(L&C)                                                                                            
02/21/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DAN ROBINSON, Research Chief                                                                                                    
Research and Analysis Section                                                                                                   
Department of Labor & Workforce Development (DLWD)                                                                              
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Gave presentation  on  Trends in  Alaska's                                                             
Employment and Population.                                                                                                      
                                                                                                                                
DR. MOUHCINE GUETTABI                                                                                                           
Assistant Professor of Economics                                                                                                
Institute of Social and Economic Research (ISER)                                                                                
University of Alaska, Anchorage                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented  on the  Alaska recession  and on                                                             
"How Does Alaska's Spending Compare?"                                                                                           
                                                                                                                                
JON BITTNER, Executive Director                                                                                                 
Alaska Small Business Development Center (SBDC)                                                                                 
University of Alaska, Anchorage Business Enterprise Institute                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented on  "Small Business Trends and the                                                             
Alaska Economy".                                                                                                                
                                                                                                                                
SYLVAN ROBB, Deputy Commissioner                                                                                                
Department of Administration (DOA)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in the hearing on HB 306.                                                                      
                                                                                                                                
KATHY LEA, Deputy Director                                                                                                      
Division of Retirement and Benefits                                                                                             
Department of Administration (DOA)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Answered questions  in the  hearing on  HB                                                             
306.                                                                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:21:05 PM                                                                                                                    
                                                                                                                                
CHAIR  SAM KITO  called  the House  Labor  and Commerce  Standing                                                             
Committee  meeting   to  order   at  3:21   p.m.  Representatives                                                               
Sullivan-Leonard,  Stutes,  Knopp,  Birch, Wool,  Josephson,  and                                                               
Kito were present at the call to order.                                                                                         
                                                                                                                                
^Presentation: Economic Trends & Entrepreneurship in Alaska                                                                     
                                                                                                                                
   Presentation: Economic Trends & Entrepreneurship in Alaska                                                               
                                                                                                                                
CHAIR KITO announced that the first order of business would be a                                                                
presentation on Economic Trends & Entrepreneurship in Alaska.                                                                   
                                                                                                                              
3:22:24 PM                                                                                                                    
                                                                                                                                
DAN  ROBINSON, Research  Chief,  Research  and Analysis  Section,                                                               
Department  of  Labor  & Workforce  Development  (DLWD),  gave  a                                                               
presentation on Trends in Alaska's  Employment and Population [in                                                               
committee  packets].    He  explained  his  department  produces,                                                               
together  with  federal  partners,  most of  the  data  on  those                                                               
trends.   He  said  that  the Institute  of  Social and  Economic                                                               
Research  (ISER) is  among the  most sophisticated  users of  the                                                               
data his department  gathers.  He added the  information does not                                                               
change with the change in administration.                                                                                       
                                                                                                                                
3:24:11 PM                                                                                                                    
                                                                                                                                
MR.  ROBINSON addressed  slide  2, "Job  losses  are smaller  but                                                               
continue."   He said he  often hears  that the recession  is over                                                               
and  also that  the state  is in  a downward  spiral.   He stated                                                               
neither are true.   He explained the state loses  jobs at a lower                                                               
rate than in mid-2016 but continues to lose jobs.                                                                               
                                                                                                                                
3:25:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD  asked   about  the  significant                                                               
difference between June 2016 and June 2017 in the graph.                                                                        
                                                                                                                                
MR. ROBINSON  answered his group  had compared June 2016  to June                                                               
2017 and it had seemed there was almost a return to zero.                                                                       
                                                                                                                                
3:26:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL asked  whether the  comparisons were  always                                                               
between the same months in subsequent years.                                                                                    
                                                                                                                                
MR.  ROBINSON   answered  in  the  affirmative.     He  explained                                                               
comparing like months controlled for seasonality.                                                                               
                                                                                                                                
REPRESENTATIVE  WOOL asked  whether the  spikes were  seasonal or                                                               
happenstance.                                                                                                                   
                                                                                                                                
MR.  ROBINSON answered  the  numbers were  fairly  small and  one                                                               
should not read too much into the month-to-month variation.                                                                     
                                                                                                                                
3:28:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH  pointed  to  the  chart  on  slide  2  and                                                               
remarked there are  about 27 bars below zero  showing job losses.                                                               
He asked whether those losses are cumulative.                                                                                   
                                                                                                                                
MR. ROBINSON answered the numbers  are not showing cumulative job                                                               
losses.  He added there  are ways to calculate cumulative losses,                                                               
currently at around 12,000, but the graph was not showing that.                                                                 
                                                                                                                                
REPRESENTATIVE BIRCH asked what the chart was showing.                                                                          
                                                                                                                                
MR. ROBINSON  answered that it  showed the duration  and severity                                                               
of job losses.                                                                                                                  
                                                                                                                                
REPRESENTATIVE BIRCH asked what  "minus 9,000" for September 2016                                                               
meant.                                                                                                                          
                                                                                                                                
MR. ROBINSON  answered there  were 9,000 fewer  jobs than  in the                                                               
prior year.                                                                                                                     
                                                                                                                                
3:29:45 PM                                                                                                                    
                                                                                                                                
MR. ROBINSON  said the  27 months in  the graph  are significant.                                                               
He added the group had looked  at other states and found that 259                                                               
times states had  gone through job losses and that  75 percent of                                                               
the time,  they had recovered in  2 years.  The  current downturn                                                               
has  extended  into unusual  territory.    He explained  business                                                               
cycles versus structural change.   He gave the examples of Oregon                                                               
and  Florida  and explained  that  often  there is  a  structural                                                               
change.   Florida  had lost  330,000 construction  jobs and  that                                                               
economic  driver  that  had contributed  to  economic  growth  in                                                               
Florida went  away.   He referred  to the  economic shock  in the                                                               
current recession.                                                                                                              
                                                                                                                                
3:33:19 PM                                                                                                                    
                                                                                                                                
MR.  ROBINSON addressed  slide 3,  "Recently released  data: wage                                                               
losses  through Q3  2017".    He stated,  "We  are still  heading                                                               
south."                                                                                                                         
                                                                                                                                
     ? 2015 Q3 wages: $4.76 billion                                                                                             
     ? 2016 Q3 wages: $4.72 billion                                                                                             
     ? 2017 Q3 wages: $4.55 billion                                                                                             
       ? Alaska employers paid about $210 million less in                                                                       
      wages in the third quarter of 2017 than in the same                                                                       
     quarter two years earlier.                                                                                                 
                                                                                                                                
3:33:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KNOPP said  it looked  to him  like the  state is                                                               
"going north" by $210 million.                                                                                                  
                                                                                                                                
MR. ROBINSON answered  the total wages for Q3  were $4.45 billion                                                               
so the graph shows $210 million  less.  He added that hundreds of                                                               
millions of dollars in the graphs are significant.                                                                              
                                                                                                                                
3:34:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH  asked whether  the gross  for the  year was                                                               
$18 billion.                                                                                                                    
                                                                                                                                
MR. ROBINSON  replied that roughly  the state had an  $18 billion                                                               
economy.    He added  that  the  third  quarter was  the  biggest                                                               
quarter of the year.                                                                                                            
                                                                                                                                
REPRESENTATIVE BIRCH  remarked that  the previous year  the state                                                               
had an  income tax proposal and  asked how that would  be applied                                                               
to the $18 billion.                                                                                                             
                                                                                                                                
MR. ROBINSON said he could not speak to the tax.                                                                                
                                                                                                                                
REPRESENTATIVE BIRCH asked whether  the calculation included out-                                                               
of-state paychecks.                                                                                                             
                                                                                                                                
MR. ROBINSON answered in the  affirmative and added that the data                                                               
was  very  helpful as  it  contained  unemployment insurance  and                                                               
captured almost all employers.                                                                                                  
                                                                                                                                
REPRESENTATIVE WOOL asked  whether the total job  loss would keep                                                               
growing.                                                                                                                        
                                                                                                                                
MR.  ROBINSON  answered there  is  a  difference between  resumed                                                               
growth and  recovery.  He said  resuming growth will matter.   He                                                               
spoke to what  it took for other states to  recover and said that                                                               
for some states  it took longer.  He remarked  that Alaska in the                                                               
1980s recovered fast but "that seems unlikely this time."                                                                       
                                                                                                                                
3:38:16 PM                                                                                                                    
                                                                                                                                
MR.  ROBINSON  spoke  to  slide 4,  "Long  View:  1970-2018  jobs                                                               
history."  He said Alaska had  a long period of stability and had                                                               
"plowed right through" two national recessions.                                                                                 
                                                                                                                                
REPRESENTATIVE  BIRCH  asked  whether   the  graph  includes  the                                                               
military positions.                                                                                                             
                                                                                                                                
MR. ROBINSON answered that it does not.                                                                                         
                                                                                                                                
REPRESENTATIVE  BIRCH  remarked  the  military  factor  is  huge,                                                               
especially in Fairbanks, Alaska.                                                                                                
                                                                                                                                
MR. ROBINSON said  the data set included  only civilian military.                                                               
He added  that fishermen aren't  included because they  are self-                                                               
employed, but seafood processors are included.                                                                                  
                                                                                                                                
REPRESENTATIVE  BIRCH commented  that those  groups must  include                                                               
thousands of people.                                                                                                            
                                                                                                                                
MR. ROBINSON  said those groups  aren't covered  by unemployment.                                                               
He said military data is collected separately every year.                                                                       
                                                                                                                                
3:41:02 PM                                                                                                                    
                                                                                                                                
CHAIR  KITO  commented that  a  military  installation would  not                                                               
count  as economic  growth except  in the  case of  the F-35s  in                                                               
Fairbanks,  Alaska, for  which people  would be  coming into  the                                                               
state.                                                                                                                          
                                                                                                                                
MR. ROBINSON  said that was  correct.   He said Fairbanks  is one                                                               
place where economic growth is forecast for 2018.                                                                               
                                                                                                                                
3:41:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  surmised that  the military  base population                                                               
would  appear as  growth, and  any military  dependents who  work                                                               
outside the base would appear.                                                                                                  
                                                                                                                                
MR. ROBINSON answered that any  non-military income would appear,                                                               
including on military bases.                                                                                                    
                                                                                                                                
3:42:29 PM                                                                                                                    
                                                                                                                                
MR. ROBINSON pointed  to the graph on slide 4  and explained that                                                               
the current  recession is  not as  deep as  the recession  in the                                                               
1980s  and that  if  the  forecast is  correct,  it could  extend                                                               
beyond the recession in the 1980s.                                                                                              
                                                                                                                                
                                                                                                                                
MR.  ROBINSON  spoke   to  slide  5,  "Our   Statewide  2018  job                                                               
forecast."  He remarked that forecasting for 2018 was difficult.                                                                
                                                                                                                                
3:43:52 PM                                                                                                                    
                                                                                                                                
MR.  ROBINSON  moved  on  to  slide  6,  "Zooming  in  on  a  key                                                               
industry":                                                                                                                      
                                                                                                                                
     • Alaska had 15,000+ oil and gas jobs in late 2014.                                                                        
        • Alaska had about 9,600 oil and gas jobs by late                                                                       
          2017.                                                                                                                 
        • Oil jobs fell by more than a third in about three                                                                     
          years.                                                                                                                
                                                                                                                                
MR. ROBINSON  moved to  slide 7, "Other  sectors with  big losses                                                               
(2015-17)":                                                                                                                     
                                                                                                                                
        • Construction -15.3 percent                                                                                            
        • State Government -7.4 percent                                                                                         
        • Prof. & Business Services -7.3 percent                                                                                
                                                                                                                                
3:45:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD  asked  whether  there  was  any                                                               
forecast for job increases.                                                                                                     
                                                                                                                                
MR.  ROBINSON  said  the  data  was  available  and  showed  that                                                               
healthcare was the only sector that  was up.  He added that local                                                               
and  tribal  governments were  lower.    He said  healthcare  job                                                               
growth was forecast to be slower in 2018.                                                                                       
                                                                                                                                
MR. ROBINSON spoke to slide  8 "The relationship between Alaska's                                                               
employment  and population".   He  stated that  in the  1980s the                                                               
state had quite a big jump in population.                                                                                       
                                                                                                                                
3:47:51 PM                                                                                                                    
                                                                                                                                
MR.  ROBINSON spoke  to slide  9, "Almost  constant growth  since                                                               
WWII".   He pointed out that  there were four years  in which the                                                               
population did  not grow.  He  pointed to one year  of population                                                               
loss when the pipeline was completed.                                                                                           
                                                                                                                                
REPRESENTATIVE  WOOL asked  about  the  state population  without                                                               
birth and death data.                                                                                                           
                                                                                                                                
MR. ROBINSON answered there was  a population overview.  He added                                                               
history has shown  growth and it is unlikely the  state will lose                                                               
large numbers of population.                                                                                                    
                                                                                                                                
3:51:21 PM                                                                                                                    
                                                                                                                                
MR.  ROBINSON moved  on to  slide 10,  "AK has  largest migration                                                               
flows  in U.S."    He pointed  out that  Alaska  has the  biggest                                                               
migration  flow  due to  the  pull  of economic  opportunity  and                                                               
quality  of life.   He  added people  also leave  the state  at a                                                               
higher  rate due  to  climate  and other  factors.   He  remarked                                                               
migration flows affect  a lot of other things, and  that there is                                                               
an unusual amount of "coming and going" in Alaska.                                                                              
                                                                                                                                
3:53:24 PM                                                                                                                    
                                                                                                                                
CHAIR KITO asked whether the numbers include military migration.                                                                
                                                                                                                                
MR. ROBINSON answered in the affirmative.                                                                                       
                                                                                                                                
3:53:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH  commented that  according to the  graph, it                                                               
looked like the population grew between 1990 and 2016.                                                                          
                                                                                                                                
MR. ROBINSON  answered the  migration number  netted to  a little                                                               
bit less  than zero.   He  explained that  if there  were exactly                                                               
matching  births  and  deaths,  then the  population  would  have                                                               
shrunk a little.                                                                                                                
                                                                                                                                
REPRESENTATIVE BIRCH  said he understood  the coming but  not the                                                               
going  part.   He  said  he did  not  understand  the 12  percent                                                               
number.                                                                                                                         
                                                                                                                                
MR. ROBINSON answered that the point  is to show that there is an                                                               
unusual amount of coming and going in the state.                                                                                
                                                                                                                                
3:55:50 PM                                                                                                                    
                                                                                                                                
MR. ROBINSON addressed slide 11, "Takeaways".                                                                                   
                                                                                                                                
     ? Economic downturn (recession) that began in late                                                                         
     2015 continues, though the losses are smaller.                                                                             
     ? Population  has been quite stable,  although 2017 saw                                                                    
     a small  loss and net  migration has been  negative for                                                                    
     the  last  five  years   and  migration  is  especially                                                                    
     important in Alaska.                                                                                                       
      ? We've forecasted another year of job loss in 2018,                                                                      
       although there's more uncertainty than usual about                                                                       
     economic direction.                                                                                                        
                                                                                                                                
3:57:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL spoke to the job losses shown in slide 2.                                                                   
                                                                                                                                
MR. ROBINSON answered  that as long as the state  is losing jobs,                                                               
the job market continues to get smaller.                                                                                        
                                                                                                                                
REPRESENTATIVE WOOL  spoke to  migration.   He surmised  that job                                                               
gain would be coupled with positive migration.                                                                                  
                                                                                                                                
MR. ROBINSON  answered that it  is correct that when  the economy                                                               
is growing, net migration tends to be positive.                                                                                 
                                                                                                                                
3:59:45 PM                                                                                                                    
                                                                                                                                
DR.   MOUHCINE  GUETTABI,   Assistant  Professor   of  Economics,                                                               
Institute of  Social and Economic Research  (ISER), University of                                                               
Alaska, Anchorage, presented on the  Alaska recession and on "How                                                               
Does Alaska's  Spending Compare?"  He  said he had been  asked to                                                               
provide   a  comparison   and   contrast   with  Mr.   Robinson's                                                               
presentation.    He described his reports and  stated he wouldn't                                                               
be able  to do  any analysis  without the  Department of  Labor &                                                               
Workforce  Development  (DLWD)  work.    He  added  that  broadly                                                               
speaking he  agreed with Mr.  Robinson.   He said he  thought the                                                               
decline in job losses  is good but does not mean  a recovery.  He                                                               
stated he thought the state was far from recovery.                                                                              
                                                                                                                                
DR. GUETTABI  explained the oil  and gas industry  affects Alaska                                                               
through  two  channels.   He  said  the  difficulty is  that  the                                                               
industry affects  the Alaska economy  through the  private sector                                                               
through  support  sector  and  household   dependent  jobs.    He                                                               
indicated that the report shows  the comparison between June 2014                                                               
to June  2017 for oil  and gas and  as of  June 2017 oil  and gas                                                               
employment was  75 percent what  it was in  2014.  He  added that                                                               
means  that economic  engine is  much  smaller.   He stated  that                                                               
professional  services are  at 90  percent of  what they  were in                                                               
2014,  and state  government employment  is  at 95  percent.   He                                                               
referred to  the sectors hit  in the  first wave which  are still                                                               
considerably below what they were a few years ago.                                                                              
                                                                                                                                
DR. GUETTABI explained that he  had expected more losses for 2017                                                               
and he  said he was surprised  Alaska didn't get hit  harder.  He                                                               
said he  thinks it's  good that  the losses  are slowing  and the                                                               
fact that the  state lost fewer jobs than expected  is due to the                                                               
fact  that local  government  and support  sectors  have held  up                                                               
well.  He  suggested the question will be how  much some of these                                                               
businesses  can sustain  if economic  activity is  lower for  the                                                               
next two and  a half years.   He said he thinks in  the next year                                                               
the state  will lose a  little less than 1  percent of jobs.   He                                                               
said he wondered  about the engine of recovery,  as healthcare is                                                               
not  a basic  sector that  generates money  from the  outside and                                                               
therefore is not  the way out of the recession  and cannot be the                                                               
future economic engine.                                                                                                         
                                                                                                                                
4:08:13 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  asked about sector  changes or economic  drivers that                                                               
have pulled other states out of their recessions.                                                                               
                                                                                                                                
DR. GUETTABI answered  that he doesn't believe that  Alaska has a                                                               
diversification problem,  but Alaska has  a leakage problem.   He                                                               
indicated a lot  of value leaves the state.   He added he thought                                                               
the state had to think  very critically about the existing supply                                                               
chain and  ensure that a  lot of the  money that is  generated in                                                               
the state stays in the state.   He mentioned that private capital                                                               
spending in  the state is down  $2.5 billion (indisc.).   He said                                                               
it is much more important to  examine the ways in which the state                                                               
can plug  some of the holes.   He stated the  Permanent Fund (PF)                                                               
is larger  than Alaska's gross  domestic product (GDP)  and asked                                                               
whether  the  PF  should  play  some  role  in  private  economic                                                               
activity if the  economic engine is lost.  He  reiterated that he                                                               
thinks the supply  chain is the "lower hanging  fruit" as opposed                                                               
to  new  industry, and  that  the  question about  the  financial                                                               
resource  playing  some   role  in  the  economy   is  worthy  of                                                               
investigation.                                                                                                                  
                                                                                                                                
4:11:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON spoke  to policy  uncertainty and  said                                                               
that  there  is  a  lost opportunity  with  not  making  economic                                                               
decisions.   He  asked how  history  can gauge  what the  outcome                                                               
might have  been had  the state  marched forward  with confidence                                                               
instead of passivity.                                                                                                           
                                                                                                                                
DR. GUETTABI said the exercise that  he did was to attempt to get                                                               
closer an answer.  He said  he often gets the question of whether                                                               
"doing nothing is costless." He  added he often finds that policy                                                               
uncertainty   around  gubernatorial   elections  causes   private                                                               
investment declines  of up  to 15  percent.   He said  the losses                                                               
from  foregone  investment  are  of the  same  magnitude  as  the                                                               
potential  losses stemming  from taxes  or government  cuts.   He                                                               
concluded that waiting is not  costless and does result in people                                                               
sitting in  the sidelines and  in missed  opportunities resulting                                                               
in a lingering recession.                                                                                                       
                                                                                                                                
4:17:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL asked  whether the next big  oil discovery is                                                               
what Dr. Guettabi  means by supply chain and  whether an increase                                                               
in oil flow will "right the ship."                                                                                              
                                                                                                                                
DR.  GUETTABI   answered  that  supply   chain  refers   to  what                                                               
businesses buy in order to produce  what they are producing.   He                                                               
said he refers to the leakage  as the amount of money that leaves                                                               
the state after  being produced in the state.   He said he thinks                                                               
the  strategy is  feasible and  starts  at the  local level  with                                                               
communities that  are resource-rich.   He  remarked that  new oil                                                               
discoveries were  not going to  happen overnight.   He questioned                                                               
whether  the state  envisions oil  and gas  as big  as it  was 10                                                               
years ago,  and if not, what  the state thinks the  next step for                                                               
Alaska should be.                                                                                                               
                                                                                                                                
4:22:24 PM                                                                                                                    
                                                                                                                                
JON   BITTNER,   Executive   Director,  Alaska   Small   Business                                                               
Development  Center  (SBDC),   University  of  Alaska,  Anchorage                                                               
Business  Enterprise  Institute,  presented on  a  PowerPoint  on                                                               
"Small Business  Trends and  the Alaska Economy".   He  said that                                                               
over  99 percent  of  businesses in  Alaska  are small  business.                                                               
Small businesses employ about 142,761  people, up from 141,316 in                                                               
2016.  He added that  small businesses represent about 70 percent                                                               
of all exporters.                                                                                                               
                                                                                                                                
4:25:07 PM                                                                                                                    
                                                                                                                                
MR.  BITTNER  described  the Alaska  Small  Business  Development                                                               
Center (SBDC) in slide 3:                                                                                                       
                                                                                                                                
     Who is the Alaska SBDC?                                                                                                    
     Operating in Alaska over 30 years                                                                                          
        • 17 employees + 4 student researchers                                                                                  
        • Seven regional centers across the state:                                                                              
        • Anchorage                                                                                                             
        • Mat-Su                                                                                                                
        • Fairbanks                                                                                                             
        • Kenai Peninsula                                                                                                       
        • Homer                                                                                                                 
        • Juneau                                                                                                                
        • Ketchikan                                                                                                             
        • Annually serve:                                                                                                       
        • 1,000 small businesses                                                                                                
        • 3,000 workshop attendees                                                                                              
        • 2,500 youth entrepreneurs                                                                                             
                                                                                                                                
4:26:05 PM                                                                                                                    
                                                                                                                                
MR. BITTNER continued to slide 4, "What Did We See in                                                                           
2017?":                                                                                                                         
                                                                                                                                
        • Record breaking numbers:                                                                                              
        • Over $18 million in capital infusion                                                                                  
        • 6,250 advising hours                                                                                                  
        • Nearly 1,000 clients served                                                                                           
        • 460 new jobs                                                                                                          
        • 155 new businesses started                                                                                            
        • Over 50 communities served                                                                                            
        • Other facts:                                                                                                          
        • 74 percent of all exporters are small                                                                                 
     businesses                                                                                                                 
        • 20 percent of small businesses are minority                                                                           
     owned                                                                                                                      
                                                                                                                                
                                                                                                                                
4:27:36 PM                                                                                                                    
                                                                                                                                
MR. BITTNER moved to slide 5, "2018 Is Starting Off                                                                             
Strong":                                                                                                                        
                                                                                                                                
        • Clients:                                                                                                              
             o New: 333                                                                                                         
             o Total: 654                                                                                                       
        • New jobs: 309                                                                                                         
        • New Business Starts: 47                                                                                               
        • Capital infusion: $5,793,533                                                                                          
        • Stage of business  new clients                                                                                        
             o Pre-venture: 217                                                                                                 
             o Startups: 38                                                                                                     
             o In-business: 79                                                                                                  
     *SBDC FY2018, Q1:Oct.  Dec. 2017                                                                                           
                                                                                                                                
4:28:20 PM                                                                                                                    
                                                                                                                                
MR.  BITTNER  continued  to  slide 6,  "2018  Alaska  SBDC  Small                                                               
Business Survey":                                                                                                               
                                                                                                                                
        • What                                                                                                                  
             o Series of 40 questions sent to small                                                                             
               businesses across the state                                                                                      
        • Who                                                                                                                   
            o Past four years of Alaska SBDC clients                                                                            
             o Over 350 respondents                                                                                             
             o Why                                                                                                              
             o Designed to measure Alaska's small business                                                                      
               climate and perspective                                                                                          
                                                                                                                                
4:28:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KNOPP  asked how many  of those 2,500  clients are                                                               
still in business.                                                                                                              
                                                                                                                                
MR. BITTNER  answered that  under 30 businesses  had gone  out of                                                               
business.  He  added that some were due to  personal life events.                                                               
He disclosed  that those  who were no  longer operating  may also                                                               
have been less incentivized to answer the survey.                                                                               
                                                                                                                                
4:29:23 PM                                                                                                                    
                                                                                                                                
MR. BITTNER spoke to slide 7, "2018 Survey Highlights":                                                                         
                                                                                                                                
        • Top challenges facing small business in Alaska                                                                        
             o Finding Funding                                                                                                  
             o High Cost of Operating in Alaska (Shipping                                                                       
               and Health Care)                                                                                                 
             o The Economy/Political Uncertainty                                                                                
        • Top challenges to hiring new employees                                                                                
             o Lack of qualified applicants (hard and soft                                                                      
               skills)                                                                                                          
             o Culture fit                                                                                                      
                                                                                                                                
4:31:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  asked about the generational  culture fit in                                                               
employees.                                                                                                                      
                                                                                                                                
MR.  BITTNER answered  there is  a generational  disconnect.   He                                                               
said there  is a  shift in  the younger  generation and  how they                                                               
value things.  He said the  older generations look at a career as                                                               
a stable thing, whereas the average  for a millennial is three or                                                               
four years.                                                                                                                     
                                                                                                                                
4:33:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH said  everyone remembers  their first  job.                                                               
He asked  whether there was any  erosion in the ability  of young                                                               
adults in summer jobs.                                                                                                          
                                                                                                                                
MR. BITTNER answered that he  thinks the upcoming generation will                                                               
be more  entrepreneurial generations.   He spoke to  the Lemonade                                                               
Day  put on  by his  organization.   He  said that  Nome has  the                                                               
highest grossing  lemonade stands.  He  added there are a  lot of                                                               
millennials and  the younger generation  who are  very interested                                                               
in creating  their own jobs as  well as baby boomers  who want to                                                               
continue working.                                                                                                               
                                                                                                                                
4:36:13 PM                                                                                                                    
                                                                                                                                
MR. BITTNER continued  to cover 2018 Survey  Highlights on slides                                                               
8-10:                                                                                                                           
        • State economy                                                                                                         
             Do you believe the state's economy will improve                                                                    
             over the next 12 months?                                                                                           
             o 79 percent of respondents were either                                                                            
               pessimistic or unsure about the state's                                                                          
               economy over the next 12 months                                                                                  
        • Local economy                                                                                                         
             Do you believe your local economy will improve                                                                     
             over the next 12 months? ?                                                                                         
             o 66 percent felt the same about their local                                                                       
               economy.                                                                                                         
                                                                                                                                
4:38:32 PM                                                                                                                    
                                                                                                                                
MR. BITTNER moved to slide 9:                                                                                                   
                                                                                                                                
        • Most small business are optimistic about the                                                                          
          coming year                                                                                                           
        • 64 percent predicted their financial situation                                                                        
          would be good or very good in 12 months                                                                               
        • Only 10 percent predicted their financial                                                                             
          situation would be poor or very poor                                                                                  
                                                                                                                                
                                                                                                                                
MR. BITTNER addressed slide 10:                                                                                                 
                                                                                                                                
        • Revenues: 2016 vs. 2017                                                                                               
             o 58 percent of small business respondents                                                                         
               report their 2017 revenues were the same or                                                                      
               higher than 2016.                                                                                                
             o Only 20 percent reported lower revenues in                                                                       
               2017.                                                                                                            
                                                                                                                                
MR. BITTNER addressed the final slide, "What Does It                                                                            
Mean?":                                                                                                                         
                                                                                                                                
        • The Alaskan economy is changing                                                                                       
        • Small businesses are projecting growth in 2018                                                                        
        • There are several barriers to business growth in                                                                      
          Alaska that need to be addressed                                                                                      
        • The SBDC is working to grow Alaska's businesses                                                                       
          and support policymakers across the state                                                                             
                                                                                                                                
4:39:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  asked for confirmation that  the respondents                                                               
to the  survey were clients whom  the SBDC had helped  within the                                                               
previous four years.                                                                                                            
                                                                                                                                
MR. BITTNER answered in the affirmative.                                                                                        
                                                                                                                                
REPRESENTATIVE WOOL  surmised that brand new  business owners may                                                               
have a different  view of the economy from those  who had been in                                                               
business for ten years.                                                                                                         
                                                                                                                                
                 HB 306-PERS/TERS DISTRIBUTIONS                                                                             
                                                                                                                              
4:40:44 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  announced that the  final order of business  would be                                                               
HOUSE  BILL NO.  306, "An  Act relating  to disbursement  options                                                               
under the Public  Employees' Retirement System of  Alaska and the                                                               
Teachers'  Retirement System  of Alaska  for participants  in the                                                               
defined contribution plan; and providing for an effective date."                                                                
                                                                                                                                
4:40:58 PM                                                                                                                    
                                                                                                                                
SYLVAN  ROBB, Deputy  Commissioner, Department  of Administration                                                               
(DOA), testified in the hearing on  HB 306.  She reminded that HB                                                               
306  moves to  take the  disbursement options  for retirees  from                                                               
statute to regulations,  so the department can be  more nimble as                                                               
more options  for disbursements  come out.   She added  that this                                                               
process will allow for public comment in the process.                                                                           
                                                                                                                                
4:41:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH asked  about the net effect  of the proposed                                                               
bill.                                                                                                                           
                                                                                                                                
MS.  ROBB answered  that HB  306  would allow  the department  to                                                               
respond  more  quickly to  retirees  and  to change  things  more                                                               
quickly.                                                                                                                        
                                                                                                                                
REPRESENTATIVE BIRCH asked for a concrete example.                                                                              
                                                                                                                                
4:43:15 PM                                                                                                                    
                                                                                                                                
KATHY LEA, Deputy Director, Division  of Retirement and Benefits,                                                               
Department  of Administration  (DOA), answered  questions in  the                                                               
hearing on  HB 306.   She  answered that one  of the  options the                                                               
Alaska  Retirement Management  Board (ARMB)  is looking  at is  a                                                               
guaranteed  lifetime  withdrawal  option.     She  explained  the                                                               
employee can go into the plan  about ten years before they retire                                                               
and can  pay an insurance  premium to  ensure their balance.   In                                                               
this way, the highest balance that  they receive will be what the                                                               
monthly benefit  payment will be based  on.  She added  that this                                                               
allows retirees  to enjoy the  upside of the market  but protects                                                               
them  from the  downside.   She  explained that  this  is a  very                                                               
important   consideration   when   preparing   participants   for                                                               
retirement readiness.   She  added the  option was  not currently                                                               
included in the  options in stature so could not  be added to the                                                               
PERS/TERS  defined   contribution  plans.    She   described  the                                                               
qualified lifetime annuity contract.   She said it had a specific                                                               
definition  with the  Internal Revenue  Service (IRS)  and defers                                                               
the annuity until age 80.                                                                                                       
                                                                                                                                
4:45:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KNOPP  asked   who  else   in  the   private  or                                                               
governmental sector was offering similar benefits.                                                                              
                                                                                                                                
MS. LEA replied that she could  not list the states but that many                                                               
states were doing  the same.  She added many  corporations in the                                                               
private  sector are  also offering  similar  retirement plans  to                                                               
their employees.                                                                                                                
                                                                                                                                
4:46:28 PM                                                                                                                    
                                                                                                                                
CHAIR KITO said public testimony was still open from a previous                                                                 
hearing.  Upon ascertaining the no one was available to testify,                                                                
he closed public testimony on HB 306.                                                                                           
                                                                                                                                
4:46:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL moved to report HB 306 out of committee with                                                                
individual recommendations and the accompanying fiscal notes.                                                                   
There being no objection, it was so ordered.                                                                                    
                                                                                                                                
4:48:01 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Labor and Commerce Standing Committee meeting was adjourned at                                                                  
4:48 p.m.                                                                                                                       

Document Name Date/Time Subjects
UAA ISER - Research Summary Comparative Spending.pdf HL&C 2/21/2018 3:15:00 PM
Presentation ISER
UAA ISER - What Do We Know About the Alaska Recession.pdf HL&C 2/21/2018 3:15:00 PM
Presentation ISER
DOLWD Jobs Forecast Presentation 2.21.18.pdf HL&C 2/21/2018 3:15:00 PM
Presentation DOLWD
AKSBDC 2017 Survey.pdf HL&C 2/21/2018 3:15:00 PM
AKSBDC
AKSBDC Statewide One Pager.pdf HL&C 2/21/2018 3:15:00 PM
AKSBDC
AKSBDC Pres - H. L&C.pdf HL&C 2/21/2018 3:15:00 PM
AKSBDC