Legislature(2019 - 2020)Anch LIO Lg Conf Rm

04/24/2020 03:15 PM LABOR & COMMERCE

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03:17:17 PM Start
03:19:15 PM Presentation(s): the Economic Impacts of Covid-19
05:15:17 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: The Economic Impacts of COVID-19 TELECONFERENCED
public health response
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                       Anchorage, Alaska                                                                                        
                         April 24, 2020                                                                                         
                           3:17 p.m.                                                                                            
                                                                                                                                
                             DRAFT                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Ivy Spohnholz, Chair                                                                                             
Representative Sara Hannan (via teleconference)                                                                                 
Representative Andi Story (via teleconference)                                                                                  
Representative Sara Rasmussen (via teleconference)                                                                              
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Louise Stutes                                                                                                    
Representative Zack Fields                                                                                                      
Representative Mel Gillis                                                                                                       
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Kelly Merrick (via teleconference)                                                                               
Representative Any Josephson (via teleconference)                                                                               
Representative Bart LeBon (via teleconference)                                                                                  
Representative Geran Tarr (via teleconference)                                                                                  
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION(S):  THE ECONOMIC IMPACTS OF COVID-19                                                                              
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MOUHCINE GUETTABI, PhD/Associate Professor of Economics                                                                         
Institute of Social and Economic Research                                                                                       
University of Alaska Anchorage                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a PowerPoint presentation,                                                                      
entitled "COVID-19 and the Alaska Economy; People, Businesses,                                                                  
Local Effects, and the State Budget."                                                                                           
                                                                                                                                
NOLAN KLOUDA, Executive Director                                                                                                
Center for Economic Development                                                                                                 
Business Enterprise Institute                                                                                                   
University of Alaska Anchorage                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Provided a  PowerPoint presentation  on the                                                             
economic impact of COVID-19.                                                                                                    
                                                                                                                                
LAURIE WOLF, President/CEO                                                                                                      
The Foraker Group                                                                                                               
City & State                                                                                                                    
POSITION   STATEMENT:     provided  a   PowerPoint  presentation,                                                             
entitled  "Alaska's Nonprofits:  Three  Considerations and  Seven                                                               
Requests  to Include  Nonprofits in  the State's  Disbursement of                                                               
CARES Relief Funding."                                                                                                          
                                                                                                                                
BILL POPP, President/CEO                                                                                                        
Anchorage Economic Development Corporation                                                                                      
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Provided  an  overview  of  the  COVID-19                                                             
Economic Impact Survey.                                                                                                         
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:17:17 PM                                                                                                                    
                                                                                                                                
CHAIR IVY SPOHNHOLZ called the  House Labor and Commerce Standing                                                             
Committee meeting to  order at 3:17 p.m.   Representatives Hannan                                                               
(via teleconference), Story  (via teleconference), Rasmussen (via                                                               
teleconference),  and  Spohnholz  were present  at  the  call  to                                                               
order.                                                                                                                          
                                                                                                                                
^PRESENTATION(S):  The Economic Impacts of COVID-19                                                                             
       PRESENTATION(S):  The Economic Impacts of COVID-19                                                                   
                                                                                                                              
3:19:15 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ announced  that the only order  of business would                                                               
be an  overview of  the economic impacts  of the  COVID-19 public                                                               
health response, beginning with Mouhcine Guettabi.                                                                              
                                                                                                                                
3:20:20 PM                                                                                                                    
                                                                                                                                
MOUHCINE   GUETTABI,   PhD/Associate  Professor   of   Economics,                                                               
Institute of  Social and Economic Research,  University of Alaska                                                               
Anchorage, provided  a PowerPoint presentation,  entitled "COVID-                                                               
19  and the  Alaska Economy;  People, Businesses,  Local Effects,                                                               
and the State  Budget."  As background  information, he explained                                                               
that he completed  an analysis of the  potential economic impacts                                                               
of COVID-19 on  the Alaska economy before any  data was available                                                               
(slide  3).   He noted  that a  number of  resources have  become                                                               
available  over  the  last  few   weeks  that  provide  real-time                                                               
information about how  people are responding to  shelter in place                                                               
mandates.   He added that these  resources could also serve  as a                                                               
measuring stick for  how well the economy is  rebounding once the                                                               
virus is in check (slide 4).   For example, he directed attention                                                               
to slide 5, which shows a  snapshot of Google mobility reports in                                                               
Anchorage.   He said  the takeaway  is that  there is  40 percent                                                               
less  traffic  since  March  15, 2020,  then  there  was  between                                                               
January 3 and  February 6, 2020.  He reminded  the committee that                                                               
the Alaska  economy has  essentially been   frozen  for  almost a                                                               
month and  a half  due to  COVID-19, which  has resulted  in more                                                               
than 60,000 people filing for  unemployment insurance in 5 weeks.                                                               
Furthermore,  there is  uncertainty surrounding  the tourism  and                                                               
fishing  seasons   and  oil  prices   have  been  in   free  fall                                                               
potentially  resulting  in  a  larger  budget  deficit  and  more                                                               
layoffs (slide  6).  He further  noted that the states   share of                                                               
the  Coronavirus Relief  Fund is  $1.25  billion.   Additionally,                                                               
4,842  firms  in Alaska  were  approved  for paycheck  protection                                                               
plans (PPP) with an average  amount of $190,000.  This represents                                                               
22% of all firms in Alaska (slide 7).                                                                                           
                                                                                                                                
3:27:16 PM                                                                                                                    
                                                                                                                                
MR.  GUETTABI relayed  that in  the  middle of  March, there  was                                                               
little sense of the potential  economic consequences of COVID-19;                                                               
therefore, using the  best available information at  the time, he                                                               
made assumptions about the losses  in the most vulnerable sectors                                                               
   Leisure  and Hospitality,  Retail,  and  Transportation    and                                                               
calculated the ripple effects on  both employment and gross state                                                               
product.   He concluded  that April employment  in 2020  would be                                                               
around  48,000 less  than  April 2019;  however,  with 62,000  UI                                                               
filings that number  has already been exceeded (slide  8).  Using                                                               
similar  assumptions, Mr.  Guettabi  found  that maintaining  the                                                               
closures for the  first two months of the  second quarter results                                                               
in  the gross  domestic product  (GDP) for  2020 being  almost $2                                                               
billion  less than  GDP for  2019.   Accounting for  the indirect                                                               
effects shows  that GDP  could be  $4.1 billion  less.   He noted                                                               
that these  declines in GDP do  not take into account  the effect                                                               
of the  declines in oil  prices, which could further  depress the                                                               
GDP  (slide  9).    In  reality,  he  said,  Alaska  has  already                                                               
surpassed these  expectations leaving the  state in an  even more                                                               
precarious situation than anticipated.                                                                                          
                                                                                                                                
3:30:00 PM                                                                                                                    
                                                                                                                                
MR. GUETTABI  indicated the  share of  all overall  employment in                                                               
vulnerable sectors due to declines  in tourism, a smaller fishing                                                               
season,  lower oil  prices, and  potential government  cuts using                                                               
July  2019  employment numbers.    He  concluded that  almost  47                                                               
percent of  the Alaska  economy is  in vulnerable  sectors (slide                                                               
10).   He  addressed  the variation  in  dependence on  different                                                               
sectors across boroughs in Alaska.   He said across boroughs, the                                                               
economic  shock will  reverberate  differently  depending on  the                                                               
industrial structure or dependence,  which raises the question of                                                               
whether  federal  or state  aid  should  be  based on  place  and                                                               
industry (slides 11-12).                                                                                                        
                                                                                                                                
3:33:24 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ  asked if fishing  falls under  natural resources                                                               
and mining.                                                                                                                     
                                                                                                                                
MR. GUETTABI  said self-employed individuals are  not included in                                                               
this analysis.  He explained  that seafood processing falls under                                                               
manufacturing for employees who  receive a paycheck [from seafood                                                               
processing].  Natural resources and mining, he said, are                                                                        
                                                                                                                                
3:34:13 PM                                                                                                                    
                                                                                                                                
MR.  GUETTABI reiterated  that varying  dependence [on  industry]                                                               
will potentially result in different  scales of damage from place                                                               
to  place and  require different  types of  economic packages  to                                                               
stabilize economic activity (slide 13).   He turned to a graph on                                                               
slide  14 to  provide context  for how  big the  shock is  to the                                                               
statewide economy.   He  explained that in  just five  weeks, the                                                               
number of  initial claims for  unemployment is more than  5 times                                                               
the  number  of  jobs  lost  between 2015  and  2018,  which  was                                                               
Alaskas   longest recession  during the  previous decline  in oil                                                               
prices.                                                                                                                         
                                                                                                                                
3:35:53 PM                                                                                                                    
                                                                                                                                
MR.  GUETTABI  continued  to   summarize  the  direct  individual                                                               
financial assistance, including boosted  federal UI equal to $600                                                               
per week,  a one  time $1,200 stimulus  check, and  typical state                                                               
UI, which averages around $250 per  week (slide 15).  He reviewed                                                               
the table on slide 15  that showed the difference between monthly                                                               
aid and lost wages.  He concluded  that in the first month of the                                                               
economic  shock, wage  and salary  employees who  make less  than                                                               
$60,000 received  more money from  the financial  assistance than                                                               
they lost in  wages.  Whereas wage and salary  employees who make                                                               
more than $60,000  are not receiving enough aid  to replace their                                                               
wages.   He noted that in  the second month, the  breakeven point                                                               
drops  from  $60,000 to  $40,000  because  the one-time  stimulus                                                               
check is no longer factored in.                                                                                                 
                                                                                                                                
3:39:19 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ  noted that this  only applies to people  who are                                                               
eligible for current unemployment  insurance and the federal wage                                                               
replacement.  She pointed out  that its  not applicable for those                                                               
who are self-employed.                                                                                                          
                                                                                                                                
MR. GUETTABI  confirmed that.  He  added that it only  applies to                                                               
wage and salary employees.                                                                                                      
                                                                                                                                
3:39:39 PM                                                                                                                    
                                                                                                                                
MR.  GUETTABI  reviewed  the  graph on  slide  18,  which  showed                                                               
adjusted gross  income by borough.   He  stated that in  2017, 55                                                               
percent of all tax returns filed  in Alaska had an adjusted gross                                                               
income of less than $50,000,  which indicates how many people are                                                               
potentially  protected by  the financial  assistance.   He  noted                                                               
that of  the 349,000 filed tax  returns in 2017, almost  44,000 -                                                               
or 13  percent -  had self-employment  tax, thus  suggesting that                                                               
any  aid should  account  for the  potential  variation in  where                                                               
peoples   money comes  from  (slide  19).   He  pointed out  that                                                               
questions remain  about how  quickly the  aid is  reaching people                                                               
and whether it is comprehensive.   He reviewed the information on                                                               
slide 22, which read [original punctuation provided]:                                                                           
                                                                                                                                
     We don't really  yet know what the  initial claims mean                                                                    
     in terms  of the  unemployment rate, and  the employer-                                                                    
     employee  separation.  Therefore,  it is  difficult  to                                                                    
     speculate about the speed of the recovery.                                                                                 
                                                                                                                                
      This short summary lays out many of the difficulties                                                                      
      associated with changes in eligibility and how they                                                                       
     translate in measurement difficulties.                                                                                     
                                                                                                                                
     It is unclear if we will see a second wave of initial                                                                      
        unemployment claims given that we expect a much                                                                         
     smaller tourism season.                                                                                                    
                                                                                                                                
3:44:36 PM                                                                                                                    
                                                                                                                                
MR.  GUETTABI turned  attention  to small  businesses in  Alaska,                                                               
which  are much  more vulnerable  to disruption.   He  noted that                                                               
almost  90 percent  of all  firms in  Alaska have  fewer than  20                                                               
employees.  Furthermore,  in 2019, total wages  were $437 million                                                               
higher in  July than  in January  due to  the seasonal  nature of                                                               
tourism  and  the  fishing  industries,  both  of  which  are  in                                                               
jeopardy  (slides 23).   He  reported  that the  $900 million  in                                                               
approved  loans that  was allocated  to  small Alaska  businesses                                                               
only  represents  6  percent  of   the  states   annual  payroll,                                                               
indicating that there will need to  be multiple rounds of aide to                                                               
keep  them   afloat  and  that   the  current  aid   package,  as                                                               
distributed, is inadequate (slide 26).                                                                                          
                                                                                                                                
3:47:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN asked where the $900 million came from.                                                                   
                                                                                                                                
MR. GUETTABI  stated that  $900 million  was allocated  to Alaska                                                               
firms from the Paycheck Protection Program (PPP).                                                                               
                                                                                                                                
REPRESENTATIVE HANNAN  sought to clarify whether  that amount has                                                               
already been allocated.                                                                                                         
                                                                                                                                
MR. GUETTABI confirmed that.  He  reiterated that a total of $900                                                               
million in aid was allocated to  4,800 Alaska firms at an average                                                               
of $190,000 each.                                                                                                               
                                                                                                                                
3:48:44 PM                                                                                                                    
                                                                                                                                
MR. GUETTABI reminded  the committee that the  statewide shock is                                                               
large, but it  will vary by place.   He said that a  gap in local                                                               
government  revenues will  emerge due  to dependence  on tourism,                                                               
oil  and gas,  and  fishing.   Additionally,  sales tax  revenues                                                               
totaled  over  $260 millions  and  bed  taxes added  another  $45                                                               
million in  2019 (slide  28).  He  emphasized the  seasonality of                                                               
Alaskas  economy  on slide 29,  which read  [original punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
     Employment data for 2019 shows that there were 35,369                                                                      
     more jobs in July than in January.                                                                                         
                                                                                                                                
     A little more than 15,000 of these jobs were added in                                                                      
     the manufacturing sector due to the fishing season.                                                                        
                                                                                                                                
         Another 14,000 were created in the Leisure and                                                                         
     Hospitality sector.                                                                                                        
                                                                                                                                
     There  is   also  typically  a  sizeable   increase  in                                                                    
     Construction, Professional  and Business  Services, and                                                                    
     retail.   Between  these   three  sectors,   there  are                                                                    
     typically another 10,000 jobs added during the summer.                                                                     
                                                                                                                                
3:50:24 PM                                                                                                                    
                                                                                                                                
MR.  GUETTABI further  noted  that these  summer  sectors have  a                                                               
large share of nonresident employees.   This could be potentially                                                               
beneficial, as many  of the seasonal jobs that get  created go to                                                               
nonresidents, which  means that even  if they arent   created the                                                               
burden wont  be on Alaska residents.   On the other hand, many of                                                               
the  nonresidents spend  money in  Alaskas   communities and  the                                                               
channels  of revenue  collected by  the seasonal  sectors is  not                                                               
just employment.   He concluded  by pointing out that  any future                                                               
aid  will need  to be   surgical  enough  to potentially  hit the                                                               
pocket of Alaska residents.                                                                                                     
                                                                                                                                
3:52:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RASMUSSEN asked what policy  makers can do to help                                                               
the state weather this economic downturn.                                                                                       
                                                                                                                                
MR. GUETTABI  said aid to  local government, aid  to individuals,                                                               
and  aid to  businesses to  keep employees  on the  payroll.   He                                                               
stressed the  importance of aggressive  action that  keeps people                                                               
attached  to their  employers.   He offered  his belief  that the                                                               
state and federal  governments are the only  entities that should                                                               
spend money right now because  outside those channels, there will                                                               
be a lack of demand.                                                                                                            
                                                                                                                                
3:53:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN asked what  tools can measure lost earnings                                                               
for  seasonal  businesses  and  what they  require  in  terms  of                                                               
payroll replacement.                                                                                                            
                                                                                                                                
MR. GUETTABI acknowledged that seasonal  businesses have not been                                                               
accounted for.  He  said the best way to help  is by working with                                                               
economic  development agencies  at a  local level  to survey  the                                                               
businesses in  question.  He  suggested identifying  them through                                                               
small business records  to create quick inventories  of the firms                                                               
that operate  within each borough.   He advised removing  as much                                                               
red tape as  possible to get them money quickly.   He offered his                                                               
belief  that  allocating  overall  money  to  a  broad  group  of                                                               
businesses will  fall short and  that a sectoral method  would be                                                               
most effective.                                                                                                                 
                                                                                                                                
3:57:04 PM                                                                                                                    
                                                                                                                                
NOLAN   KLOUDA,   Executive   Director,   Center   for   Economic                                                               
Development, Business Enterprise  Institute, University of Alaska                                                               
Anchorage,   provided   a   PowerPoint  presentation   from   the                                                               
University of Alaska  Center for Economic Development  (CED).  He                                                               
highlighted Alaskas   most vulnerable sectors, which  account for                                                               
around 90,000 jobs,  as well as March UI claims  by industry.  He                                                               
pointed  out  that   19  percent  of  the  claims   were  in  the                                                               
accommodation and food services  sector, followed by construction                                                               
at 16 percent (slides 3-4).   Mr. Klouda addressed a study by the                                                               
National Bureau of Economic Research  on how small businesses are                                                               
adjusting to  COVID-19.  The  research, published in  April 2020,                                                               
concluded the  following: 43 percent of  businesses are currently                                                               
closed; employee counts have been  reduced by 40 percent; and the                                                               
typical business has $10,000 in  median monthly expenses and less                                                               
than one  month of  cash in  hand (slides 5-7).   The  study also                                                               
found  that  less than  one-third  of  restaurants and  bars  are                                                               
likely  to  remain  open  after 4  months  of  social  distancing                                                               
mandates (slide 8).                                                                                                             
                                                                                                                                
4:04:21 PM                                                                                                                    
                                                                                                                                
MR.  KLOUDA  noted that  88  percent  of professional  economists                                                               
agree  or strongly  agree with  the  statement,  A  comprehensive                                                               
policy  response to  the coronavirus  will  involve tolerating  a                                                               
very large contraction  in economic activity until  the spread of                                                               
infections has  dropped significantly.    Furthermore,  0 percent                                                               
disagreed with  the statement and  only 5 percent  were uncertain                                                               
(slide 9).   He addressed  the Paycheck Protection  Program (PPP)                                                               
and the  Economic Injury  Disaster Loan  (EIDL), two  features of                                                               
the  federal  CARES Act  for  small  business  relief.   The  PPP                                                               
provided forgivable  loans to businesses  if at least  75 percent                                                               
went towards  payroll.  The  PPP allocated 4,800 loans  to Alaska                                                               
businesses,  averaging $190,000  each.   The  EIDL offered  1,600                                                               
loan advances at an average  of $4,6000 (slide 10).  Nonetheless,                                                               
Mr. Klouda  explained that the  programs created  challenges that                                                               
are important to note.  He said  the pathway that the PPP used to                                                               
get  money to  businesses  worked through  an  existing group  of                                                               
lenders, which meant  borrowers had to navigate  which banks were                                                               
participating  in the  program and  which banks  would only  take                                                               
existing customers, raising the  question of whether enough small                                                               
businesses  received  the  funding.   Another  issue  focused  on                                                               
payroll forgiveness.  Many businesses  face the prospect of going                                                               
broke from  ongoing operating  expenses even  after they  laid of                                                               
their  employees.    Furthermore, businesses  that  settled  with                                                               
unforgivable  debt that  they  will need  to pay  off  in a  down                                                               
economy will be difficult.   He further noted that these programs                                                               
were quickly depleted, despite being replenished (slide 11).                                                                    
                                                                                                                                
4:11:19 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ said  there was $350 billion spent on  the PPP in                                                               
two weeks,  with $900  million of  that in  the state  of Alaska.                                                               
She asked what  the second wave of authorization  for funding was                                                               
for both the PPP and the EIDL.                                                                                                  
                                                                                                                                
MR. KLOUDA  reported that $310  billion was allocated to  the PPP                                                               
and $50 billion was allotted to the EIDL.                                                                                       
                                                                                                                                
4:12:13 PM                                                                                                                    
                                                                                                                                
DR.  GUETTABI noted  that  in  the second  wave  of funding,  $60                                                               
billion was reserved specifically for small businesses.                                                                         
                                                                                                                                
4:12:31 PM                                                                                                                    
                                                                                                                                
MR.  KLOUDA,  returning to  his  presentation,  said a  group  of                                                               
statewide   economic  development   organizations  put   forth  a                                                               
recommendation to  the governor and the  Alaska State Legislature                                                               
requesting that  money from the CARES  Act be set aside  for cash                                                               
grants to employers.  He  recounted that this letter [included in                                                               
the committee  packet] argues that more  aggressive measures need                                                               
to take place  in order to help businesses (slide  12).  He added                                                               
that it  would be more  valuable to provide grants  to businesses                                                               
for operating expenses.                                                                                                         
                                                                                                                                
4:14:46 PM                                                                                                                    
                                                                                                                                
CHAIR  SPOHNHOLZ explained  that  awarding  grants to  for-profit                                                               
businesses  may  seem   counterintuitive;  however,  rather  than                                                               
deferring  a debt  that businesses  will have  to carry  on their                                                               
books  for  a long  period  of  time,  a  grant would  help  keep                                                               
employees on payroll and get  those businesses healthy as quickly                                                               
as possible.  She asked if that is a fair statement.                                                                            
                                                                                                                                
MR.  KLOUDA agreed.   He  expressed his  concern that  businesses                                                               
acquiring large amounts  of debt will have to repay  that debt in                                                               
an economy that may be depressed for a long time.                                                                               
                                                                                                                                
4:15:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HANNAN asked  for clarification  on Mr.  Klouda's                                                               
conversation with the  OMB director regarding the  use of federal                                                               
funding for grants to small businesses.                                                                                         
                                                                                                                                
MR. KLOUDA clarified that during  todays  House Finance Committee                                                               
meeting  the  OMB  Director  testified  that  the  U.S.  Treasury                                                               
indicated that  grants would  be a more  suitable use  of funding                                                               
than loans.                                                                                                                     
                                                                                                                                
4:18:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STORY asked what qualifies as a small business.                                                                  
                                                                                                                                
MR.  KLOUDA  said  a  business  with  fewer  than  500  employees                                                               
generally qualifies as a small business.                                                                                        
                                                                                                                                
4:20:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR inquired  as  to the  potential avenues  for                                                               
administering the funding for prospective grants.                                                                               
                                                                                                                                
MR. KLOUDA offered his understanding  that under SB 241, there is                                                               
a  provision that  funding  could go  through  the Department  of                                                               
Commerce,  Community  &  Economic   Development  (DCCED)  and  be                                                               
distributed  by the  Alaska  Regional Development  Organizations.                                                               
Additionally, ATIA could distribute  money to tourism businesses.                                                               
He opined that  it needs to be an efficient  channel that can get                                                               
money out  expeditiously.  He  further emphasized  the importance                                                               
of not  being  overly onerous  while  balancing accountability so                                                               
that the  money goes where  its  needed and doesnt   get misused.                                                               
He recommended that the  state economic development organizations                                                               
help define that conversation.                                                                                                  
                                                                                                                                
4:22:43 PM                                                                                                                    
                                                                                                                                
MR. KLOUDA resumed  his presentation on slide 14,  which listed a                                                               
network  of statewide  economic  development  organizations.   He                                                               
offered  that  this  group  of  economic  developers  is  at  the                                                               
committees  disposal to help define  business related issues.  He                                                               
said they  are  boots  on the  ground  when  it comes  to helping                                                               
businesses  and  advising  local   governments  on  the  economic                                                               
recovery.                                                                                                                       
                                                                                                                                
4:25:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEBON  offered his belief  that if grant  money is                                                               
intended  to   be  distributed   to  businesses   through  Alaska                                                               
Industrial  Development and  Export Authority  (AIDEA) or  Alaska                                                               
Housing  Finance  Corporation  (AHFC),  involving  the  banks  is                                                               
important.   He maintained that  banks know their  small business                                                               
customers better  than anyone.   He  suggested that  AIDEA, AHFC,                                                               
and the state be included in the allocation process.                                                                            
                                                                                                                                
MR.  KLOUDA pointed  out that  nonprofit  organizations are  also                                                               
important employers  as well.   He offered  his belief  that they                                                               
are easily neglected in conversations  about small businesses and                                                               
should be included in the conversation.                                                                                         
                                                                                                                                
4:27:07 PM                                                                                                                    
                                                                                                                                
LAURIE  WOLF,  President/CEO,  The   Foraker  Group,  provided  a                                                               
PowerPoint  presentation,  entitled  Alaska's  Nonprofits:  Three                                                               
Considerations and  Seven Requests  to Include Nonprofits  in the                                                               
State's Disbursement of  CARES Relief Funding."   She stated that                                                               
Alaska nonprofits  play a critical  role in the  states  economy,                                                               
both as major employers and  revenue generators.  No industry can                                                               
prosper without the  strength of the nonprofit  sector, she said.                                                               
Nonprofits are  part of health  care, fisheries, and the  oil and                                                               
gas  industry.     They  provide  essential   services,  such  as                                                               
firefighting,  early  childcare,  basic utilities,  housing,  and                                                               
food security (slide 2).                                                                                                        
                                                                                                                                
4:28:44 PM                                                                                                                    
                                                                                                                                
MS. WOLF examined the nonprofit  sector in Alaska.  She explained                                                               
that 501(c)(3)  nonprofits, which  are classified  as charitable,                                                               
make up  77 percent of the  nonprofits in the state.   Charitable                                                               
nonprofits reflect a variety of  missions, including health, art,                                                               
conservation, education, and  many more (slides 3-4).   She noted                                                               
that nonprofits  employ 44,100 Alaskans and  represent 17 percent                                                               
of  the  states   workforce,  with  up to  40  percent  in  rural                                                               
regions.   In 2016,  nonprofits generated  $3.8 billion  in total                                                               
income and $6.98  billion in revenue into the  economy (slide 5).                                                               
She said nonprofits are responsible  for creating jobs in Alaska;                                                               
however, they are  often overlooked because they are  not seen as                                                               
an industry in and of themselves.                                                                                               
                                                                                                                                
4:31:42 PM                                                                                                                    
                                                                                                                                
MS.  WOLF stated  that  6 weeks  ago, as  the  state headed  into                                                               
quarantine,  the nonprofit  sector  was surveyed.   The  findings                                                               
indicated that  almost 15 percent  of nonprofits were at  risk of                                                               
closure.   Furthermore,  they are  currently filling  significant                                                               
gaps  in  the  economy  while  facing  resource  challenges  from                                                               
cancellations or  postponement of fundraising events,  a decrease                                                               
in  volunteerism, loss  of  earned income  due  to closures,  and                                                               
impacts  on  their  investments from  a  declining  stock  market                                                               
(slides 6-10).   She  shared three  considerations for  relief in                                                               
response  to COVID-19:  (1) Plan  for the  future; (2)  Timing of                                                               
nonprofit financial relief; (3) Create  many paths   one sector                                                                 
all nonprofits.   She pointed out that  organizations need relief                                                               
with few  restrictions to fund  operational costs  of adaptation,                                                               
temporary  closure, and  revenue loss  from the  pandemic (slides                                                               
11-15).                                                                                                                         
                                                                                                                                
4:37:16 PM                                                                                                                    
                                                                                                                                
MS. WOLF continued to offer  seven requests to include nonprofits                                                               
in  the $1.25  billion federal  relief funding.   The  summary of                                                               
recommendations   on  slide   26   read   as  follows   [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     1. Say nonprofits   Recommendation:  Every time you use                                                                
     the  words  small  business  in  your  relief  response                                                                    
     include nonprofits.                                                                                                        
                                                                                                                                
     2.   Support   all   small   nonprofit   businesses                                                                    
     Recommendation:  Alaska's solution  should include  all                                                                  
     nonprofits  that  have  been  financially  impacted  by                                                                    
     COVID-19.  Recommendation:   Create  granting  programs                                                                    
     based  on  mission  activity in  Alaska  not  based  on                                                                    
     staffing as a qualification.                                                                                               
                                                                                                                                
     3.  Grants,  not  loans      Recommendation:  Create  a                                                                  
     separate granting option with  a minimum of $50 million                                                                    
     for nonprofits outside of the state process.                                                                               
                                                                                                                                
     4.  If loans,  make them  accessible    Recommendation:                                                                  
     Require   equitable   and    appropriate   access   for                                                                    
     nonprofits to  any loan program created  or mandated by                                                                    
     the state.  We welcome  the use of  Foraker's recommend                                                                    
     parameters for nonprofits to access loan program.                                                                          
                                                                                                                                
     5.  Partner with  local  governments    Recommendation:                                                                  
     Strongly encourage  local governments in  your district                                                                    
     and in  your overall  guidelines to  include nonprofits                                                                    
     in both their direct and indirect funding decisions.                                                                       
                                                                                                                                
     6.  Adopt  federal  OMB flexibility     Recommendation:                                                                  
     Ensure  flexibility in  state grants  and contracts  by                                                                    
     following,  at   a  minimum,  the  federal   Office  of                                                                    
     Management    and    Budget   COVID    relief    rules.                                                                    
     Recommendation:  Ask  nonprofit  leaders which  of  the                                                                    
     temporary  relaxed regulations  can  continue based  on                                                                    
     positive evidence during this time.                                                                                        
                                                                                                                                
     7.  Be transparent  to honor  intent    Recommendation:                                                                  
     Create   a   public-facing   dashboard  to   show   how                                                                    
     nonprofits,  small  businesses, and  local  governments                                                                    
     are  benefiting from  CARES  dollars  through the  SBA,                                                                    
     PPP, and EIDL programs and  also from the $1.25 billion                                                                    
     in state relief funds                                                                                                      
                                                                                                                                
MS.  WOLF opined  that following  these three  considerations and                                                               
seven requests would  allow nonprofits to continue  to respond to                                                               
this pandemic and would ensure their place in Alaskas future.                                                                   
                                                                                                                                
CHAIR SPOHNHOLZ  acknowledged the  importance of  considering the                                                               
nearly  5,800 nonprofits  in the  state that  employ over  44,000                                                               
Alaskans while contemplating the economic landscape.                                                                            
                                                                                                                                
4:44:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEBON  maintained that banks know  their nonprofit                                                               
customers  well.   He  opined that  regarding  grants, the  banks                                                               
should  consider  nonprofits the  same  as  their small  business                                                               
customers.  He recommended that the  banks come up with a formula                                                               
that treats both  groups equally.  He expressed  concern that the                                                               
available  assistance  will  dry   up  quickly,  establishing  an                                                               
urgency  to find  a solution  fast.   He  suggested bringing  the                                                               
banks  into a  discussion  with  AIDEA, AHFC,  and  the state  to                                                               
create a formula that benefits as many as possible.                                                                             
                                                                                                                                
4:45:54 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ said  given that $900 million in  PPP funding was                                                               
awarded in  two weeks, there  will be a  shortage of funds.   She                                                               
added that state  funds should complement that  using the federal                                                               
CARES Act funding.                                                                                                              
                                                                                                                                
4:46:25 PM                                                                                                                    
                                                                                                                                
CHAIR  SPOHNHOLZ  asked Ms.  Wolf  to  provide the  criteria  for                                                               
nonprofits to be considered for the pick-click-give program.                                                                    
                                                                                                                                
MS.  WOLF   said  she   would  follow   up  with   the  requested                                                               
information.                                                                                                                    
                                                                                                                                
4:47:57 PM                                                                                                                    
                                                                                                                                
BILL   POPP,   President/CEO,  Anchorage   Economic   Development                                                               
Corporation, informed  the committee that  he is co-chair  of the                                                               
Economic  Resiliency Task  Force (ERTF)  that was  formed at  the                                                               
beginning  of the  pandemic by  Mayor Berkowitz.   As  background                                                               
information,   he   explained   that   the   Anchorage   Economic                                                               
Development Corporation  (AEDC) was  created by  the municipality                                                               
in 1987 and functions as  an economic development organization in                                                               
partnership with the city of Anchorage.   The ERTF, he said, is a                                                               
volunteer  organization   supported  by   Alaskas   congressional                                                               
delegation,  the  municipality  of  Anchorage, and  a  myriad  of                                                               
business organizations.   The focus is on  immediate response and                                                               
mitigation  strategies, as  well as  better communication  to the                                                               
business community and  the workforce in the  community at large.                                                               
He noted  that their  long-term focus will  be on  strategies for                                                               
workforce  retraining  and  encouraging new  business  growth  to                                                               
create new branches of the  economy that could replace those that                                                               
have been badly damaged.                                                                                                        
                                                                                                                                
MR.  POPP  proceeded  to  provide an  overview  of  the  COVID-19                                                               
Economic Impact  Survey [included in  the committee packet].   He                                                               
noted that  this is the second  of two surveys given  to numerous                                                               
businesses in Anchorage.  He  directed attention to question 4 of                                                               
the survey, which asked,  Have  you experienced any disruption in                                                               
business  due  to COVID-19.     He  said  there  is a  5  percent                                                               
increase  in  those  that  answered yes  compared  to  the  first                                                               
survey, which  was launched one  day after the  announcement that                                                               
restaurants, bars,  and other related  businesses were  to close.                                                               
Question 5 read,   If yes, please indicate how  your business has                                                               
been  affected  by  COVID-19  (check   all  that  apply).     The                                                               
responses  revealed  that 30  percent  have  laid off  staff,  13                                                               
percent  have  closed  until  restrictions   are  lifted,  and  a                                                               
substantial  percentage   continue  to  operate   with  employees                                                               
working  from home  or continue  to operate  at a  reduced scale.                                                               
Question 6  asked,  Has  your business  experienced a  decline in                                                               
revenue due  to COVID-19 in  the last  30 days (compared  to same                                                               
period in  2019).   Mr.  Popp reported that 80  percent responded                                                               
affirmatively,  which is  a 12  percent increase  from the  first                                                               
survey.    Question  8  asked,   How much  do  you  project  your                                                               
revenues  will change  in  the  first half  of  2020 compared  to                                                               
2019.   The  results, he said, remain  relatively unchanged, with                                                               
46  percent responding,   decrease  significantly.    Question  9                                                               
asked,  Is your  revenue outlook for 2020  more pessimistic, less                                                               
pessimistic, or  about the same  as it was  two weeks ago.    The                                                               
responses indicate  that 56  percent are  more pessimistic.   The                                                               
responses  to  question 10  suggest  that  45 percent  have  made                                                               
employment  reductions due  to COVID-19    a  7 percent  increase                                                               
from the first survey.                                                                                                          
                                                                                                                                
4:55:40 PM                                                                                                                    
                                                                                                                                
MR. POPP continued to question 11.   The responses showed that 27                                                               
percent  expect to  make employment  cuts  in the  future due  to                                                               
COVID-19.  He said that  nearly 40 percent answered affirmatively                                                               
in the first survey, indicating that  the current rate of cuts is                                                               
slowing.  The responses to  question 12 indicated that 36 percent                                                               
of supply chains have been  disrupted.  Question 14 revealed that                                                               
55 percent have experienced disruptions  from vendors and service                                                               
providers, which increased  by 17 percent from  the first survey.                                                               
The  responses  to  question  16 suggested  that  62  percent  of                                                               
businesses are not  at risk of closing permanently  due to COVID-                                                               
19   16  percent said they are  at risk.  Question  17 asked,  Is                                                               
the risk today of your  business closing permanently greater than                                                               
it  was 10  days  ago.    The responses  showed  that 27  percent                                                               
answered affirmatively.   The  final pages  of the  survey detail                                                               
what steps  the businesses are  taking to mitigate the  impact of                                                               
COVID-19.                                                                                                                       
                                                                                                                                
4:59:33 PM                                                                                                                    
                                                                                                                                
MR.  POPP concluded  by  addressing the  grants  initiative.   He                                                               
recounted that  ADEC proposed an  ardor-based grant  program that                                                               
would use fixed  dollar amount grants that  would be disseminated                                                               
to businesses.   He added that it would be  focused on businesses                                                               
with 50  employees or fewer.   He  continued to explain  that the                                                               
ERTF  followed up  with  a $125  million  grant proposal  wherein                                                               
businesses  would  receive an  allocation  of  $10,000 flat  with                                                               
certain  stipulations,  such  as   an  Alaska  business  license,                                                               
employees that are working in  the state, and other criteria that                                                               
would give  accountability to  the grant  being distributed.   He                                                               
stated  that loans  involve a  more  arduous process  and lose  a                                                               
higher percentage  of the original  funding to  processing costs.                                                               
He referenced  a grant  program in  the city  of Boston  that has                                                               
that allows for grants in  the $10,000, $5,000, and $2,000 dollar                                                               
range  based on  the business  size  and its  needs.   He said  a                                                               
program like that could be  incredibly important.  He offered his                                                               
belief that the complexities of  banking decisions that are based                                                               
on customer  relationships could  create a  significant challenge                                                               
due to  the large number  of licensed entities doing  business in                                                               
Anchorage that  dont  necessarily have a  relationship with their                                                               
banks, but  are still an important  part of the employer  base in                                                               
the  city.     He  urged  the  committee   to  strongly  consider                                                               
dedicating  a  portion   of  the  $300  million   to  grants  for                                                               
businesses and nonprofits.  He  opined that its  a critical piece                                                               
that  could deployed  quickly with  a strong  partnership between                                                               
the  different   economic  development  organizations   and  many                                                               
nonprofits that have  the capacity to go through a  simple set of                                                               
criteria to get the grants distributed.                                                                                         
                                                                                                                                
CHAIR  SPOHNHOLZ  said it's  nice  to  hear that  businesses  are                                                               
starting  to  think that  things  are  getting better  given  the                                                               
recession  that  has taken  place  in  the  last  5 weeks.    She                                                               
expressed her hope that things would get better from here.                                                                      
                                                                                                                                
5:03:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HANNAN  asked  for  the timeframe  in  which  the                                                               
survey was conducted.                                                                                                           
                                                                                                                                
5:03:55 PM                                                                                                                    
                                                                                                                                
MR.  POPP said  the survey  that  was reviewed  today started  on                                                               
April  14, 2020  and closed  out on  April 23,  2020.   The first                                                               
survey was done over a 5-day period starting on March 10, 2020.                                                                 
                                                                                                                                
5:04:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN  asked if the same  businesses participated                                                               
in both surveys.                                                                                                                
                                                                                                                                
5:05:05 PM                                                                                                                    
                                                                                                                                
MR.  POPP said  he cannot  claim that  the exact  same businesses                                                               
participated  in  both  surveys.     He  explained  that  it  was                                                               
distributed  through the  business network  of Anchorage  and was                                                               
inclusive  of both  small and  large businesses.   He  added that                                                               
they surveys were anonymous.                                                                                                    
                                                                                                                                
5:05:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN  sought to  clarify whether  the businesses                                                               
that participated in the surveys were in Anchorage only.                                                                        
                                                                                                                                
MR. POPP confirmed that.                                                                                                        
                                                                                                                                
CHAIR  SPOHNHOLZ expressed  that  she was  incredibly sobered  by                                                               
today's   presentations.     She   highlighted  the   information                                                               
presented by Mr.  Guettabi suggesting that Alaska  has five times                                                               
more jobs in the last five  weeks than was lost during the three-                                                               
year  period  of  the  most   recent  economic  recession.    She                                                               
expressed her hope  that many of these people will  be rehired as                                                               
the state loosens  up on some of the public  health measures that                                                               
were ratified to prevent the  spread of COVID-19.  She encouraged                                                               
small businesses  that are  in need  of aide  to work  with their                                                               
bankers to  attain access to the  next round of funding  from the                                                               
PPP.   She  emphasized that  the [PPP]  funds do  not need  to be                                                               
repaid if they are spent on payroll, rent, mortgages, etcetera.                                                                 
                                                                                                                                
5:10:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN recounted  having two lengthy conversations                                                               
with  two different  constituent  businesses  who have  struggled                                                               
with getting  aid because  of their  banks.   She said  the banks                                                               
were overwhelmed  and would  not process  the applications.   She                                                               
expressed concern that if banks  are overwhelmed, businesses will                                                               
flounder  without the  assistance that  banks typically  provide.                                                               
She also  pointed out that  the cannabis industry  cannot legally                                                               
have  a  banking  relationship,  despite being  one  of  the  few                                                               
positive revenue  streams right  now.   She recommended  that the                                                               
state avoid  granting banks the  authority to process  grants and                                                               
loans exclusively, because  that would not meet the  need of some                                                               
of the Alaskan communities.                                                                                                     
                                                                                                                                
5:12:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RASMUSSEN agreed  with  Representative Hannan  on                                                               
the  importance  of helping  businesses  that  might not  have  a                                                               
relationship with a bank on their financial needs.                                                                              
                                                                                                                                
5:12:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STORY  expressed  her  concern  that  some  small                                                               
businesses  are not  familiar  with how  to  network through  the                                                               
banking  industry   and  the  different  processes   involved  in                                                               
applying  for  loans.   She  opined  that a  simple,  streamlined                                                               
process would be helpful.                                                                                                       
                                                                                                                                
5:14:34 PM                                                                                                                    
                                                                                                                                
CHAIR  SPOHNHOLZ  acknowledged that  banks  can  be part  of  the                                                               
solution, but  not the  only solution  for the  reasons described                                                               
previously.   She added that  there will need  to be a  series of                                                               
distribution  mechanisms   to  get  money  to   the  right  place                                                               
expeditiously.                                                                                                                  
                                                                                                                                
5:15:17 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Labor and Commerce Standing Committee meeting was adjourned at                                                                  
[5:15] p.m.                                                                                                                     

Document Name Date/Time Subjects
Klouda referenced letter HL&C Presentation 04.24.2020.pdf HL&C 4/24/2020 3:15:00 PM
COVID19 Economic Impacts
Klouda COVID Economic Impacts HL&C Presentation 04.24.2020.pdf HL&C 4/24/2020 3:15:00 PM
COVID19 Economic Impacts
Guettabi COVID Economic Impacts HL&C Presentation 04.24.2020.pdf HL&C 4/24/2020 3:15:00 PM
COVID19 Economic Impacts
Wolf COVID Economic Impacts HL&C Presentation 04.24.2020.pdf HL&C 4/24/2020 3:15:00 PM
COVID19 Economic Impacts
Popp AEDC Economic Survey Results on COVID19 HL&C 04.24.2020.pdf HL&C 4/24/2020 3:15:00 PM
COVID19 Economic Impacts