Legislature(2017 - 2018)BARNES 124
01/24/2018 03:15 PM House LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Overviews: Department of Labor & Workforce Development; Department of Commerce, Community & Economic Development | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
January 24, 2018
3:18 p.m.
MEMBERS PRESENT
Representative Sam Kito, Chair
Representative Adam Wool, Vice Chair
Representative Andy Josephson
Representative Louise Stutes
Representative Chris Birch
Representative Gary Knopp
Representative Colleen Sullivan-Leonard
MEMBERS ABSENT
Representative Mike Chenault (alternate)
Representative Bryce Edgmon (alternate)
COMMITTEE CALENDAR
OVERVIEWS: DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT;
DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC DEVELOPMENT
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
GREG CASHEN, Acting Commissioner
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Presented an overview of DLWD with the use
of a PowerPoint presentation.
PALOMA HARBOUR, Director
Division of Administrative Services (ASD)
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the DLWD
overview.
MIKE NAVARRE, Commissioner Designee
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Presented an overview of DCCED with the use
of a PowerPoint presentation.
ACTION NARRATIVE
3:18:35 PM
CHAIR SAM KITO called the House Labor and Commerce Standing
Committee meeting to order at 3:18 p.m. Representatives Wool,
Josephson, Stutes, Birch, Knopp, Sullivan-Leonard, and Kito were
present at the call to order.
^OVERVIEWS: DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT;
DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC DEVELOPMENT
OVERVIEWS: DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT;
DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC DEVELOPMENT
3:19:25 PM
CHAIR KITO announced that the only order of business would be
overviews of the Department of Labor & Workforce Development
(DLWD) and the Department of Commerce, Community & Economic
Development (DCCED).
3:20:08 PM
GREG CASHEN, Acting Commissioner, Department of Labor &
Workforce Development (DLWD), began the overview by referring to
slide 2 of his PowerPoint presentation; the slide was entitled
"Department Overview." He stated that the mission of DLWD is to
protect workers and advance opportunities for employment. The
three key program priorities are as follows: protect Alaska's
workers through statutory and regulatory assistance and
enforcement; workforce development to support Alaska hire and
economic development; and income replacement for injured,
unemployed, and permanently disabled workers.
ACTING COMMISSIONER CASHEN directed the committee's attention to
slide 3, entitled "Department Organizational Chart," which
illustrates the department's organizational chart by displaying
the three key program areas and the respective agencies under
each.
ACTING COMMISSIONER CASHEN referred to slide 4, entitled "FY2019
Governor's Budget: $147,109.7," and offered the following
statistics: the governor's budget for fiscal year 2019 (FY 19)
totals $147,109,000; 50 percent is from federal funds; $20.6
million is from the unrestricted general fund (UGF) - down $12.8
million, or 38 percent, from FY 15; and the department has 754
positions - down 123 positions from FY 15.
3:22:28 PM
ACTING COMMISSIONER CASHEN turned to slide 5, entitled "Protect
Workers," and relayed the accomplishments for FY 19 under that
priority area as follows: The DLWD's Wage and Hour
Administration staff, who are responsible for conducting wage
and hour investigations, collected $1 million in wages,
penalties, and interest owed to Alaska workers. The Mechanical
Inspection Section (MIS) staff conducted over 6,500 inspections
and over 2,000 job site visits to ensure worker and public
safety. The Alaska Labor Relations Agency (ALRA) issued 100
percent of its decisions in an average of 69 days - well below
the target of 90 days. The Alaska Occupational Safety and
Health (AKOSH) staff's efforts contributed to Alaska's record
low workplace lost time injuries and illnesses rate.
ACTING COMMISSIONER CASHEN referred to the graph on slide 6,
entitled "Workplace Lost Time Injuries and Illnesses Rate per
100 Employees." He pointed out that that there has been a
downward trend of the lost time injuries and illnesses rate; the
FY 17 rate is half of that of FY 07. He said that DLWD staff
impacted the rate by focusing consultation and enforcement
efforts on the causes of lost workday injuries and illnesses in
the construction, transportation, and seafood processing
industries. He stated that in FY 17, the transportation
incident rate saw a 14 percent reduction and the construction
rate saw a 24 percent reduction, bringing lost time injuries and
illnesses rates for those industries to the lowest levels in a
decade and exceeding the target reduction of 3 percent.
3:24:13 PM
ACTING COMMISSIONER CASHEN referred to slide 7, which identifies
the challenges under the "protect workers" priority. He relayed
that MIS staff and AKOSH staff must travel to remote areas of
the state; the cost of rural travel can create a significant
burden to the program; and travel costs have increased in the
past few fiscal years. He offered that AKOSH is especially
vulnerable to high travel costs, as travel is frequently last
minute due to fatalities, catastrophes, or imminent danger
complaints requiring prompt responses. He added that turnover
continues to be a challenge, particularly for highly skilled
industrial hygienists. These workers do not make salaries
comparable to opportunities in the private sector. He said that
providing timely dispute resolution is an ongoing challenge for
ALRA, especially because many factors are outside of the
agency's control.
ACTING COMMISSIONER CASHEN referred to slide 8 to highlight
legislation related to DLWD. Proposed legislation, HB 121,
addresses AKOSH penalties, and proposed legislation, HB 114,
would establish a $10 fee for paper filings of boiler and
unfired pressure vessel inspection reports; both bills are in
the Senate Labor and Commerce Standing Committee. He relayed
that HB 255 was introduced January 2018 by Representative Chris
Tuck and was referred to the House Labor and Commerce Standing
Committee; this proposed legislation would change the penalty
for individuals performing electrical or plumbing work without a
valid certificate of fitness from a misdemeanor to a violation.
3:26:25 PM
ACTING COMMISSIONER CASHEN continued with slide 9, entitled
"Workforce Development," to relay the accomplishments in that
priority area. The accomplishments are as follows: The
Division of Employment and Training Services (DETS) staff
provided career and technical services to over 98,000 Alaskans
through the Alaska Job Center Network (AJCN). Division staff
also increased the number of healthcare registered
apprenticeship programs from 7 to 22 and the number of
apprentices from 32 to 220; the employers were from Metlakatla
to Utquiagvik and Yakutat to Unalaska. Division staff served
over 1,000 youth with disabilities through credential career
pathway programs - internship programs, transition camps, and
summer work experiences. These programs were funded with a
federal disability employment initiative grant. In the Division
of Vocational Rehabilitation (DVR), staff significantly expanded
the preemployment transition services program to serve 846
students with disabilities in over 100 communities across Alaska
as required by the federal Workforce Innovation and Opportunity
Act (WIOA).
3:27:55 PM
ACTING COMMISSIONER CASHEN moved on to slide 10 and continued to
cite the accomplishments under the "workforce development"
priority. The DETS placed job center staff at the Goose Creek
Correctional Center (GCCC) and the Hiland Mountain Correctional
Center (HMCC) through the federal Linking to Employment
Activities Pre-Release (Leap) grant to assist inmates prior to
reentry. The Leap grant is a two-year grant providing $250,000
each year for the activities. The Alaska Vocational Technical
Center (AVTEC) achieved record high graduation rates.
ACTING COMMISSIONER CASHEN turned to the graph on slide 11,
entitled "Percent of AVTEC Long-Term Program Students Who
Graduate (exceeded the target of 80 percent in FY2017)." He
said that in FY 17, 97 percent of AVTEC students who enrolled in
long-term training programs completed the training; 88 percent
of FY 16 AVTEC students were employed in training-related jobs
one year later; and AVTEC reduced its programs as a result of
strategic cuts targeting under-enrolled programs and
strengthened its efforts to ensure the success of students in
the remaining programs.
ACTING COMMISSIONER CASHEN referred to slide 12, which
identifies the challenges under the "workforce development"
priority. He relayed that DETS is working to replace its aging
information systems for employment training services and job
training programs to improve services and meet reporting
requirements of WIOA.
3:29:34 PM
REPRESENTATIVE STUTES asked for a clarification of "COE" on
slide 11.
3:29:41 PM
PALOMA HARBOUR, Director, Division of Administrative Services
(ASD), Department of Labor & Workforce Development (DLWD),
responded that "COE" stands for the [American] Council on
Education (ACE) and is the accrediting body for AVTEC.
ACTING COMMISSIONER CASHEN continued his discussion of the
challenges listed on slide 12 by saying that the current
foundational system for employment services, the Alaska Labor
Exchange System (ALEXsys), is about 15 years old, and the
technology is clunky and outdated; upgrading the system will
enhance the user experience for both job seekers and employers.
He stated that DETS will utilize federal funds, including a
technology grant, for the cost associated with procurement and
transition. He mentioned that due to a lack of federal funding,
there are currently 15,000 unprocessed Work Opportunity Tax
Credit (WOTC) applications, and some Alaska employers have
waited for up to three years for a response. He said that the
division is working diligently to address this issue and has
made some progress in reducing processing time through
electronic handling of applications. He added that he
anticipates significant progress through automation of
processing with addons to the new data systems.
ACTING COMMISSIONER CASHEN stated that AVTEC suffered severe
water damage in August 2017 - two weeks after school began -
after a pipe burst in the dormitory resulting in a shutdown of
38 beds; the rooms have not yet been reopened. He relayed that
as staff work on this high priority and critical maintenance
need, they are unable to focus on regular maintenance and
operation projects or deferred maintenance projects. He
mentioned that aging underground fuel tanks are beginning to
pose a problem for the school and need to be replaced.
3:31:53 PM
ACTING COMMISSIONER CASHEN referred to slide 13 to address
legislation related to the "workforce development" priority. He
stated that HB 141, reauthorizing the Technical Vocational
Education Program (TVEP) for another three years, was signed
into law by the governor October 2017. The chart on slide 13
shows how funds are distributed among the TVEP recipients. He
pointed out that TVEP funding has decreased in the past two
fiscal years, because as jobs and wages in Alaska decrease, so
does revenue to the TVEP fund.
3:32:48 PM
ACTING COMMISSIONER CASHEN referred to slide 14, entitled
"Income Replacement," to review the accomplishments in that
priority area. He stated that last year the Division of
Workers' Compensation (DWC) Special Investigations Unit (SIU)
investigated 2,400 businesses and brought 600 employers into
compliance with the [Alaska] Workers' Compensation Act (AWCA).
He relayed that the Disability Determination Services (DDS)
staff provided adjudication of claims for Social Security
[Administration] (SSA) disability benefits; last year the staff
received a SSA deputy commissioner's citation for thorough
analysis and responsive cost estimates. He stated that Alaska's
Unemployment Insurance (UI) program staff processed claims
totaling over $128 million in UI benefits to nearly 39,000
claimants. The DLWD also recovered over $5 million in
overpayments, fraudulent claims, and penalties, which protects
the UI Trust Fund.
ACTING COMMISSIONER CASHEN referred to the graph on slide 15,
entitled "Percent of Initial Unemployment Insurance Payments
Processed within 21 Days (exceeded the target of 87 percent in
2016)." He relayed that UI program staff provided a high level
of service by processing 93.3 percent of initial claims within
21 days, which is well above the federal timeliness benchmark of
87 percent.
ACTING COMMISSIONER CASHEN moved on to slide 16 to address the
challenges under the "income replacement" priority area. He
relayed that it will be difficult for the UI program to maintain
current service levels because of the high rate of staff
turnover and reduction in federal funding. He stated that DDS
is challenged with meeting SSA's initial case clearance goal due
to a significant attrition rate and hiring approval. He said
that one challenge that DWC faces is making the workers'
compensation process more efficient absent any statutory
changes. He maintained that improvements could be realized with
legislative changes.
3:34:54 PM
ACTING COMMISSIONER CASHEN referred to slide 17 to report on
additional related proposed legislation: the "Omnibus Workers'
Compensation" legislation, HB 79, would increase efficiency and
flexibility of the workers' compensation system; HB 69 would
repeal the Workers' Compensation Appeals Commission (WCAC); and
HB 142 would increase the maximum weekly benefit for UI.
3:36:23 PM
REPRESENTATIVE SULLIVAN-LEONARD asked for information on the
high turnover rate - what it has been in the past couple years
and how quickly DLWD has been able to fill positions.
ACTING COMMISSIONER CASHEN replied that he would provide to the
committee the information on the entire department.
REPRESENTATIVE BIRCH referred to the 754 DLWD positions noted on
slide 4 and asked for the vacancy factor and how the department
budgets for it.
MS. HARBOUR answered that the department does have that
information, but she did not come prepared to offer it in the
present committee meeting.
3:38:27 PM
REPRESENTATIVE BIRCH suggested that with a vacancy factor of 5
percent, the department would budget for 5 percent less
positions. He asked to be provided with more information on the
LEAP grant and assisting correctional facility inmates with
reentry. He asked additionally how the state integrates with
the contemporary online recruitment sites, such as monster.com
and craigslist.
MS. HARBOUR responded that the State of Alaska recruits through
its Workplace Alaska system; for difficult to fill positions,
such as UI positions, the state advertises elsewhere, like
craigslist. She explained that DLWD's job exchange system
[ALEXsys] is opened to employers and job seekers across the
state; the system is 15 years old and needs replacement. She
maintained that the department will be exploring other solutions
to best meet employer and job seeker needs.
3:40:31 PM
REPRESENTATIVE BIRCH expressed his understanding that TVEP is
[funded by] UI [taxes] paid by working Alaskans, and he referred
to slide 14, which states that $128 million in UI benefits were
paid to nearly 39,000 claimants. He asked whether the FY 19
governor's distribution of $10.9 million represents UI separated
from the total receipts and reallocated to different education
institutions.
ACTING COMMISSIONER CASHEN explained that the TVEP funds come
out of the employee contribution to the UI system before claims
are paid; employees contribute about 27 percent to the system
and employers about 73 percent. He offered to provide a diagram
that illustrates the funding mechanism.
REPRESENTATIVE BIRCH opined that the UI should be used for the
benefit of the employees. He referred to slide 4 and asked if
$73 million of the [$147 million] FY 19 budget is from federal
grants.
ACTING COMMISSIONER CASHEN replied, "That's correct."
3:42:25 PM
REPRESENTATIVE KNOPP referred to slide 13 and asked Acting
Commissioner Cashen if he attributed the decline in revenue over
the four fiscal years to the local economy.
MS. HARBOUR answered, "Yes, absolutely." She explained that a
portion of the taxable wage base supplies the fund; as the
number of jobs decline, the overall wage base declines;
therefore, less revenue flows into the fund.
3:43:11 PM
CHAIR KITO expressed his belief that there is a significant
economist group within DLWD; he asked whether that group resides
in one of the organizational chart boxes or outside of the
chart.
ACTING COMMISSIONER CASHEN identified the group as the Research
and Analysis Section and stated that it was part of ASD.
MS. HARBOUR explained that not all the sections are on the
chart; the commissioner's office and ASD supports all the
programs within DLWD. She relayed that the Research and
Analysis Section primarily provides labor market information in
support of the workforce development programs; it also performs
AKOSH statistical analysis in support of the protect workers
program and the UI actuarial in support of the income
replacement programs.
3:44:22 PM
CHAIR KITO mentioned that last year there was discussion about
the interest of the governor for having additional agency
coordination to identify areas of common services that could be
combined for efficiency. He asked if there is anything to
report from DLWD with respect to working with the Department of
Education and Early Development (DEED) or other agencies to find
efficiencies.
ACTING COMMISSIONER CASHEN replied that DLWD works closely with
DEED, primarily with career and technical education; however, no
programs have been merged. He added that internally, DLWD has
merged two divisions - the Division of Business Partnerships and
the Employment Security Division. He added that the
"independent living" component of DLWD was moved to the
Department of Health and Social Services (DHSS).
3:45:54 PM
CHAIR KITO referred to discussions regarding the possibility of
overlap between DLWD, DEED, and the University of Alaska (UA)
around workforce development and regarding communication between
those agencies for providing services.
ACTING COMMISSIONER CASHEN responded that DLWD does communicate
regularly with UA primarily to ensure DLWD is not duplicating
programs. He expressed his belief that DLWD does not have any
duplicative programs with DEED. He maintained that the
department is always looking for efficiencies and non-
duplication of effort.
3:46:45 PM
CHAIR KITO referred to slide 14, which states that DLWD has paid
over $128 million in UI benefits to nearly 39,000 claimants. He
asked whether DLWD has seen trends in the numbers of UI benefit
claimants. He asked whether the number correlates directly to
the unemployment rate or the two vary.
MS. HARBOUR answered that the UI actuarial staff of the Research
and Analysis Section tracks UI rates, claims, period of
payments, and a variety of other data year after year; it
compares past years and gives forecasts for future years; and it
provides a monthly report to UI programs. She maintained that
currently Alaska has record low UI claims, yet, the unemployment
rate is at the ten-year average. She said that the unemployment
rate represents people who are actively seeking employment in
the prior four weeks; they may no longer be eligible for
benefits or never have worked. She summarized that currently
the UI rates are somewhat high, and the UI claims are somewhat
low.
CHAIR KITO asked if the reports can be found on the DLWD
website.
MS. HARBOUR replied that these detailed reports are not on the
department's website. She said that the December issue of
DLWD's magazine, Alaska Economic Trends, contains an article
that specifically addresses the differences between the number
of claims and the UI rate and speculates on the reasons for the
discrepancy.
3:49:07 PM
CHAIR KITO inquired as to DLWD's specific goals regarding worker
safety, workforce development, and income replacement. He asked
whether there have been efforts to identify annual goals for
those priority areas.
MS. HARBOUR responded that like every state department, DLWD has
performance measures that it reports on that are part of the
budget development process. She offered that some goals were
mentioned for the protect workers priority. She stated that
DLWD has target reduction percentages for transportation and
construction incidence rates; DLWD targeted a 3 percent
reduction, but the actual reduction percentage was significantly
higher. She continued by saying that for each program area,
DLWD has key performance indicators; the graphs and charts in
the PowerPoint illustrate some of these.
3:50:11 PM
REPRESENTATIVE KNOPP stated that in the budgetary process,
legislators have been asked to not focus on personnel numbers
for departments and programs that are serving the greater good.
He referred to HB 255, which addresses the Certificate of
Fitness, asked if the intent is to benefit the workers or to
raise fees. He gave an example: A few years ago, DLWD required
people driving pilot cars to have flagger certificates. After a
two- to four-hour online course and a fee of $200, the person
can drive a pilot car, yet there is nothing in the course that
is applicable to driving a pilot car. He asked if the
department designs a curriculum applicable to a program.
ACTING COMMISSIONER CASHEN responded that for plumbing and
electrical work, there is a Certificate of Fitness required. He
relayed that since currently there is no way to enforce that
requirement except through the Alaska Court System (ACS), HB 255
would allow a citation to be issued to gain compliance.
REPRESENTATIVE KNOPP reiterated his concern about the
applicability and necessity of the course for certification of
pilot car drivers versus flaggers. He asked if the department
considers the applicability of the course.
MS. HARBOUR responded that she would investigate that issue.
3:53:31 PM
EPRESENTATIVE WOOL stated that he hears from many business
owners with a concern for workforce availability - the lack of
people wanting to work or trained to work. He mentioned the
AVTEC culinary program. He relayed that hotels hire hundreds of
workers, some seasonally, such as for Denali National Park and
Preserve, and some in Fairbanks. He maintained that these
workers are almost exclusively hired from out of state. He
mentioned that he toured a canary in Kodiak recently; many of
the workers are not native to Alaska. He said that in certain
industries, it is difficult to find good workers. He stated
that many people come to Alaska with J-1 visas to work in the
"box" stores. He asked if this is an issue that DLWD addresses.
ACTING COMMISSIONER CASHEN answered that it is an issue in
seafood processing and tourism and reported that he is not as
familiar with the retail industry. He said that for many of
these jobs, the underlying issue is wages, and for some it is
lack of skills and work ethic among potential employees. He
maintained that the more programs DLWD has for career and
technical education and high school vocational education,
instilling work readiness and soft skills, the better off Alaska
is. He relayed that many foreign workers come to Alaska for the
seafood processing industry; DLWD is working on improving the
Alaska hire efforts primarily in seafood and tourism. He
offered that [finding workers] is a challenge even in some of
the industries requiring significant training; employers are
having a harder time finding skilled workers for some specific
occupations.
3:56:34 PM
CHAIR KITO mentioned that HB 255, the Certificate of Fitness
legislation, is scheduled to be heard in the 2/2/18 House Labor
and Commerce Standing Committee meeting.
3:57:10 PM
The committee took an at-ease from 3:57 p.m. to 3:59 p.m.
3:59:07 PM
CHAIR KITO announced that the next order of business would be an
overview of the Department of Commerce, Community & Economic
Development (DCCED).
3:59:20 PM
MIKE NAVARRE, Commissioner Designee, Department of Commerce,
Community & Economic Development (DCCED), began the overview by
referring to slide 2 of the PowerPoint presentation, entitled
"Department Mission." He stated that DCCED's mission is to
promote strong communities, a healthy economy, and to protect
consumers in Alaska; and through that mission, DCCED can
coordinate, develop, and promote a sustainable economy. To
fulfill the mission, DCCED has six divisions, and there are
seven corporate entities under its umbrella. The corporate
entities are as follows: Alaska Energy Authority (AEA); Alaska
Industrial Development and Export Authority (AIDEA); Alaska
Seafood Marketing Institute (ASMI); Regulatory Commission of
Alaska (RCA); Alaska Gasline Development Corporation (AGDC);
Alcohol and Marijuana Control Office (AMCO); and Alaska Railroad
Corporation (ARRC). He added that these entities are in the
department's budget; he has some oversight over their management
but very little control.
COMMISSIONER NAVARRE relayed that DCCED touches virtually every
Alaskan through insurance banking, and it issues about 225
licenses - one-third corporate, one-third business, and one-
third professional. The department has a strong, well-
functioning regulatory framework, which is essential for
economic development and for protecting Alaskans.
4:02:01 PM
COMMISSIONER NAVARRE referred to slide 3, entitled "Economic
Growth," and reported that economic growth and opportunity is
the future of Alaska's economy. He stated that DCCED has just
completed phase one of its Community Economic Development
Strategy (CEDS) for Alaska. He indicated it was the first time
that a comprehensive strategy had been put together in this
fashion; it's designed to transcend administrations and to be a
workable tool and strategy for the long-term in Alaska. He
added that the process began with many hearings in different
areas of the state; there was representation from all regions
and participation from all sectors within a steering committee
as the plan was developed. He maintained that the plan is a
high-level view. The second phase will involve narrowing the
plan, focusing in on actionable items coming out of the broad
economic development strategy, and looking at ways to employ the
actionable items.
COMMISSIONER NAVARRE relayed that AIDEA's mission is to promote,
develop, and advance economic growth and diversification in
Alaska through various financing tools. In 2017, AIDEA's loans
and investments were more than $116 million, leveraging an
additional $36 million in private sector financing, and paying a
$12.8 million dividend to the state general fund (GF). He
offered that the accumulative total of the dividend over the
past 20 years is $392 million; that is based on significant
investment in AIDEA by the state.
COMMISSIONER NAVARRE stated that to promote a healthy economy,
DCCED has 280 loans totaling $37 million across 11 loan programs
to Alaska owned businesses, including $150 million in the
Commercial Fishing Revolving Loan Fund (CFRLF); it has
partnerships with the University of Alaska (UA) to support
resource development efforts and to develop new industry and
manufacturing through Made in Alaska and the Alaska Products
Preference Program.
4:04:22 PM
COMMISSIONER NAVARRE relayed that although no GF dollars support
ASMI in this year's budget, ASMI is responsible nationally for
about 99,000 full-time equivalent jobs, $5.2 billion in annual
labor income, and about $12.8 billion economic output. In
Alaska, ASMI is a significant contributor to the economy;
internationally, it is important as well.
4:05:01 PM
COMMISSIONER NAVARRE referred to slide 4, entitled "Affordable
Energy," which highlights the Alaska Gasline Development
Authority (AGDA), AEA, and Administrative Order No. 272. He
stated that AEA's mission is to reduce costs of energy in
Alaska; DCCED is working to accomplish that in a variety of
ways, including some legislative initiatives to ensure that all
areas of Alaska are benefitted. He related that AGDC is
continuing its work advancing a gasline with the signing of
high-level agreements in Asia, including China, Japan, and [the
Republic of] Korea.
COMMISSIONER NAVARRE stated that [Governor Bill Walker's]
Administrative Order 272 directed continuing focus on consumer
energy generally and the Interior electric energy projects
specifically. He mentioned that the work continues; last month,
AIDEA moved forward the sale of Pentex Alaska Natural Gas
Company ("Pentex") to the Interior Gas Utility (IGU); the intent
is to deliver gas energy to Fairbanks. He added that the new
executive director of AEA, Janet Reiser, is a former board
member of Chugach Electric Association, Inc. (CEA) and is
working to narrow AEA's focus as the state's lead agency on
energy policy. He cited, as example, using the interties of the
Bradley Lake Power Project (BLPP) to continue fostering better
relationships and efficiencies among all the Railbelt utilities.
He mentioned that there are projects in the governor's budget
this year; Kake's [Gunnuk Creek] hydroelectric project is in the
governor's budget; and Power Cost Equalization (PCE) serves 88
utilities and over 83,000 people in 195 communities.
4:07:03 PM
COMMISSIONER NAVARRE moved on to slide 5, entitled "Strong
Communities," and mentioned that Community and Regional Affairs
used to be a department, but now is a division within DCCED. It
is enshrined in the Alaska Constitution and established by law
in the executive branch to advise and assist local government.
He stated that DCCED is the local government entity for the
unincorporated areas of Alaska. He relayed that there are seven
Division of Community and Regional Affairs (DCRA) offices across
the state - Kotzebue, Nome, Bethel, Dillingham, Anchorage,
Juneau, and Fairbanks; there are 30 local government specialists
that support local governments in the areas represented; the
support includes utilities, elections, ordinances, and a wide
variety of training and other services. He added that DCRA also
has responsibility for the Municipal Land Trustee Program. He
mentioned the community resources that DCRA makes available:
community online database; interactive community maps; and
community status reports measuring seven indicators over 500
communities in Alaska.
4:08:10 PM
COMMISSIONER NAVARRE referred to slide 6, entitled "Protecting
Consumers," and relayed that $13 million is generated annually
by securities registration and filing fees. He stated that
DCCED is the sole registry for Alaska Native Claims Settlement
Act (ANCSA) corporation proxy filing. They are not regulated by
the U.S. Securities and Exchange Commission (SEC); therefore,
DCCED exercises oversight.
COMMISSIONER NAVARRE stated that the Corporations, Business and
Professional Licensing Section performs the following functions:
processes business licenses and tobacco endorsements; registers
corporate compliance, reporting, and trademarks; licenses
professionals; supports professional boards; and responds to
public complaints regarding violations of licensing. He added
that all are funded by designated general funds (DGF) rather
than UGF. He maintained that DCCED is asked to regulate
corporation, business, and professional licensing for a variety
of reasons, including public protection and maintaining
standards in the industry; therefore, these entities have agreed
to pay for the cost of the board and oversight provided by the
state.
COMMISSIONER NAVARRE mentioned that the DCCED Division of
Insurance has been nationally recognized for its adaptive work
in the individual market for health insurance; Alaska was one of
only three states whose rate decreased this year, which was due
to Alaska's Section 1332 Innovation waiver.
COMMISSIONER NAVARRE relayed that AMCO includes the Alcohol
Beverage Control Board and the Marijuana Control Board; although
the office is within DCCED, the director of the office is
answerable to the two boards. He offered that he works with
that office to have good communication and provide oversight.
COMMISSIONER NAVARRE stated that RCA regulates public utilities
and the regulatory assistance project (RAP) to try to lower
costs; an example is the effort to encourage improved and more
efficient functioning of the utility cooperatives in the
Railbelt.
4:11:15 PM
COMMISSIONER NAVARRE moved on to slide 7, entitled "Title 4
Rewrite," and relayed that Title 4 of the Alaska Statutes dates
to the 1980s; it needs updating and streamlining; Senator
Micciche has introduced SB 76 and a variety of other bills
addressing it; it involves distilleries, breweries, and alcohol
and marijuana oversight. He stated that DCCED's approach to
these issues is that there are competing interests and
historical issues; DCCED will identify the issues, listen to all
sides, and try to build consensus; it will attempt to develop a
framework in the alcohol laws that will allow for efficient and
effective oversight and management, yet one that can adapt over
time as things change in Alaska.
COMMISSIONER NAVARRE continued with slide 8, entitled "Statewide
Economic Development Strategy," to describe "Northern
Opportunity: Alaska's Economic Strategy." It is a strategy that
builds on past, local, and regional efforts; U.S. Economic
Development Administration (EDA) funds were used for the effort,
and they were matched by the funding of personnel in the
Division of Economic Development (DED).
COMMISSIONER NAVARRE referred to slide 9, entitled
"Administrative Order 289 - Climate Change," and explained that
the order is the governor's initiative. The focus areas are as
follows: mitigation - actions to reduce, sequester, and offset
greenhouse gas emissions; adaptation - actions to evaluate risks
and adopt measures to address or reduce the vulnerability of
Alaska's citizens; and research - responses for identified and
emerging problems. These three focus areas will be considered
in the context of climate change and its effect on areas of
Alaska including coastal areas.
4:14:06 PM
COMMISSIONER NAVARRE turned to slide 10, entitled "Reinsurance
and the 1332 Waiver," and reported that the waiver represents a
$332 million federal funding "home run." The legislature
appropriated $110 million as a match; the first $55 million came
from GF and funded the program; the second $55 million came from
premium taxes in the insurance industry. He mentioned that Lori
Wing-Heier, Director, Division of Insurance, and her staff
deserve credit for securing the waiver; it is very innovative;
it was nationally recognized; it resulted in stabilizing the
private insurance market and contributed to the reduction in
health insurance individual markets rates this year. He offered
to provide more information on the waiver. He stated that with
federal funding, Alaska has an opportunity to reduce the state
contribution; DCCED is seeking to quantify the savings for
finance committee review.
4:15:46 PM
COMMISSIONER NAVARRE referred to slide 11, entitled
"Streamlining Professional Licensure," and relayed that a
strategic plan was instituted by DCCED that focuses on
streamlining the professional licensure process and ensuring
that applications are processed as quickly as possible. The
initial response from the department has been the reduction in
[process] time from the receipt of the application and the
initial response from more than 60 days to under 30 days. For
medical licensure for physicians, physician assistants, and
nurses, the time is down to within ten days for the initial
review and status report. He mentioned that Senator Cathy
Giessel introduced SB 108, which would allow for faster
licensure for applications without an answer of "yes," which
could be indicative of investigations, probations, or other
problems with the application.
COMMISSIONER NAVARRE moved on to slide 12, entitled "Production
Forecast," and offered that he accepted his position because he
wished to formulate an economic message. He referred to the
graph on slide 12, entitled "ANS [Alaska North Slope] History
and Forecast by Pool," which illustrates the basis for Alaska's
economic challenge: even with new oil fields, Alaska is at best
stemming the rate of decline. He offered that to attain an
incline in the production rate, significant investment is
needed; this calls for a comprehensive fiscal and economic plan
allowing for stability in the oil tax structure and recognizing
the cost of economic development in areas of Alaska's economy
other than oil and gas.
4:17:50 PM
COMMISSIONER NAVARRE continued with slide 13, entitled "Economic
Impact of Growth," to present a scenario of 5,000 new jobs in
the Fairbanks North Star Borough (FNSB): Of the 5,000 jobs,
4,000 would require an influx of workers; 1,000 of them would be
absorbed within the FNSB. This would represent a $1 billion
capital investment; it would include 4,000 new households, 2,500
new students in the school district, 4,000 new housing units
with an average value per home of $200,000. Commissioner
Navarre said that he chose a limited liability company (LLC) for
the scenario, because currently LLCs are not taxable under the
state's tax structure. He pointed out that under the scenario,
there would be an additional $22 million in property tax
revenues at the local level and $10 million in new education
expenses, which leaves $12 million for roads, emergency
services, social services, and other needs. He concluded that
the cost of delivering the services that go with the economic
development are covered by the local taxes. He pointed out that
at the state level there would be 5,000 new jobs created and no
new revenues, yet the state pays two-thirds of the cost of
education, all of the ACS costs, and the bulk of the public
safety costs; therefore, there would be an additional $30
million in expenses associated with the economic development
described in the scenario, and no new revenues to pay the costs
associated with it.
COMMISSIONER NAVARRE relayed that he has modeled this scenario
in other areas of the state, including the Kenai Peninsula, and
discovered that local governments have a broader tax base,
therefore, are able to pay the costs associated with the
economic development, but the state does not. He concluded that
there are tremendous economic opportunities available in Alaska
and for its citizens; Alaska wants to take advantage of these
opportunities; however, there are associated costs which must be
built into the model so that the tax structure is predictable
and stable for those making the investments. He said that
without building those costs into the model, from an economic
perspective, there is a disincentive to investment in Alaska.
He offered that his intent is to foster a long-term look at the
economy as a basis for building the fiscal regime, rather than a
short-term discussion about taxes.
4:20:46 PM
CHAIR KITO asked for clarification that on slide 13,
Commissioner Navarre has indicated the consequences of adding
5,000 new jobs to FNSB through an economic development project
or circumstance.
COMMISSIONER NAVARRE agreed. He added that if the jobs were oil
and gas jobs, then the jobs would bring in more revenue than the
costs associated with the jobs; however, the scenario is an
investment like for a widget factory or a manufacturing plant.
The intent of the scenario is to demonstrate the costs of
economic development in the short-term and in the longer-term.
Alaska's fields are mature fields; Prudhoe Bay Oil Field was
discovered in 1969; the peak of oil production in Alaska was
1988; Alaska would like to have those production levels, but it
would require significant investment in Alaska. He maintained
that even with additional investment, Alaska will be faced with
a transition to a different type of economy at some point and a
broader tax burden.
COMMISSIONER NAVARRE commented that the picture of a blanket
toss on slide 14 signifies the celebration of a whaling crew for
a successful hunt and a leap of faith, which is what Alaska
needs to do to take advantage of opportunities and structure its
economic foundations to take advantage of them.
4:22:39 PM
REPRESENTATIVE BIRCH referred to slide 6, "Corporations,
Business & Professional Licensing," and stated that the
legislature has had issues allocating to flat rates; it
struggled last year with "cost cause or cost payer." He
suggested Alaska reasonably align the cost of licenses and
renewals to the cost of providing the license.
REPRESENTATIVE BIRCH mentioned the Title 4 rewrite as it
pertains to licensing. He said that he has constituents in
Anchorage and friends in Fairbanks that operate microbreweries;
he is concerned about the "hard line" on the industry and the
squabbles about what is permissible. He maintained that
microbreweries are good for the economy; these small businesses
are employing people; Napa Valley is very successful; and Alaska
has an opportunity to be successful in the microbrewery
industry.
REPRESENTATIVE BIRCH referred to slide 13 and maintained that if
the 5,000 jobs in the scenario were in the mining industry or
oil and gas industry, the workers would be contributing revenue
to the state times ten; if the jobs are in the retail industry,
not so much. He emphasized that Alaska's long suit is resource
development, Alaska should focus on resource development and
attract jobs in those industries.
4:25:41 PM
COMMISSIONER NAVARRE responded that in respect to Title 4
rewrite, he has been immersed in many aspects of it; he
understands the issues and recognizes that there are many
competing economic interests and an irrational adherence to the
status quo. He maintained that DCCED will try to build
consensus, apply pressure where its needed, ensure that it is
structured so that it can be effectively managed, and recognize
changing dynamics in the industry.
COMMISSIONER NAVARRE commented that in respect to economics, he
wholly agrees that Alaska needs to encourage resource
development in Alaska. He added that the oil and gas industry
brings in more revenue than the costs it incurs; however, he
expressed that he is not sure that is the case with the mining
industry. He maintained that what is not built into slide 13 is
the multiplier effect that goes along with any economic activity
- service industry jobs and other lower level jobs that require
but don't pay for state services. He recommended taking a broad
look at Alaska's economy; finding areas of agreement; and
building an economic plan that recognizes different aspects.
4:27:23 PM
REPRESENTATIVE KNOPP referred to ASMI on slide 3 and mentioned
the decision last year to close the Seattle office and relocate.
He asked if that occurred.
COMMISSIONER NAVARRE expressed his belief that the employees are
still in transition, and almost all have moved to Juneau in
renovated space on Franklin Street. He stated that he is an ex-
officio member of the ASMI board; attended the last board
meeting; and was impressed with the level of interest and the
sincere approach of the ASMI board to the issues facing the
seafood industry.
REPRESENTATIVE KNOPP mentioned that he has gotten calls
regarding the relocation of the office to Juneau instead of
Anchorage; the callers felt that Anchorage was the better
location for marketing.
REPRESENTATIVE KNOPP referred to slide 5, which read in part,
"An agency shall be established by law in the executive branch
of the state government to advise and assist local government."
He asked if that is in place or will happen in the future. He
mentioned that he is not aware of that happening.
CHAIR KITO responded that the agency referenced is DCRA,
formerly the Department of Community and Regional Affairs. He
responded to the question regarding ASMI by saying that the
staff transition schedule indicates that they are completely out
of the Seattle office; the state's lease ends on June 30, 2018.
4:29:47 PM
CHAIR KITO referred to slide 9, regarding the Administrative
Order 289 on climate change, and commented that he recently
heard the following statistic: in 2016, national disasters in
the U.S. cost the country $80 billion; in 2017, with multiple
natural disasters - hurricanes, fires, floods, and landslides -
it is estimated the cost will be $306 billion; this is a greater
than 300 percent increase. He expressed that this is a concern,
and it indicates to him that climate change will become an
economic issue. He said that he worries about the additional
economic burden this will have on Alaska either for insurance
costs or for actual expenses dealing with natural disaster, as
Alaska is the front line of climate change.
COMMISSIONER NAVARRE replied that the rationale behind the
administrative order was to recognize and identify where the
impacts may manifest and how best to deal with them. He
maintained it will be an economic issue. He asserted that even
if it is impossible to definitively name the cause for climate
change, the fact that it is happening is known; ocean
acidification will have far reaching impacts on the seafood
industry in Alaska; and the coastal areas will be impacted as
well.
4:32:05 PM
REPRESENTATIVE WOOL referred to the Statewide Economic
Development Strategy and the Northern Opportunity on slide 8 and
asked what division oversaw that effort.
COMMISSIONER NAVARRE explained that the Statewide Economic
Development Strategy is a high-level view identifying areas
needing attention; it is under the Division of Economic
Development; it was funded by the federal EDA grant; and it is
available on the DCCED website.
4:33:00 PM
REPRESENTATIVE WOOL referred the graph on Slide 12, showing oil
production history and forecast, and asked whether the intent of
the graph is to show the downward trend and to convey that
absent a major oil find, Alaska will need to adjust to a "new
mindset."
COMMISSIONER NAVARRE answered that the graph illustrates two
simultaneous circumstances: the first circumstance relates to
the aging oil fields and the attempt to stem the decline, which
could be precipitous; the second relates to new fields that have
been identified and will hopefully be developed over time to
increase production. The projections are about merging those
two conditions. He added there are some very promising finds on
the North Slope, but development takes billions of dollars in
investment. He said that to encourage the investment, Alaska
must have some stability and be welcoming to development. He
maintained that to gain that stability for the oil industry,
either the burden must be shared, or the oil industry will
disproportionately bear the burden. He asserted that a broader
foundation for Alaska is in its best interest.
4:34:59 PM
REPRESENTATIVE KNOPP referred to a letter from the Alaska
Conference of Mayors requesting a stable fiscal plan. He
asserted that Alaska currently does not have the means to
support all the requests in the letter. He offered that most of
the organized cities have "stepped up to the plate," adopted
city powers, and provided services; however, boroughs have not
adopted the powers and provided the services. He suggested that
if legislators and Alaska residents refuse to adopt a revenue
plan, at some point it may be appropriate to ask the boroughs to
organize, adopt the powers, and provide the services they are
requesting from the state.
4:36:20 PM
COMMISSIONER NAVARRE responded that Alaska has economies of
scale that are unique; therefore, Alaska has services at the
state level that other states provide at the local level. He
referred to police coverage and said that Alaska providing
coverage to the boroughs through the Alaska State Troopers (AST)
has worked for a long time. He maintained that by statute,
adopting those powers must be by a public vote. He asserted
that there is significant cost associated with assuming the
powers; it is difficult to get people to pay for something even
when they recognize the need. He said that it behooves the
state to have the discussion with local governments regarding
the balance between what the state should be doing and what
local government should be doing.
COMMISSIONER NAVARRE continued by saying that the history of
boroughs in Alaska is that many were forced to form through the
Mandatory Borough Act of [1963]; Alaska has many service areas,
some with a larger tax base than others. He maintained that
some service areas worked well at the time they were designed,
but as they have evolved, the statutes have not evolved with
them. He offered that the state needs to take a more
comprehensive view of how state and local governments work in
Alaska; DCCED will attempt to do that in conjunction with the
economic plan. He maintained that Alaska gravitates towards
solutions on an individual basis; once they are in place, Alaska
has little "fiefdoms" that become very parochial and make it
difficult to deviate from the status quo, even if an overall
solution is better. He said that the statutes are designed in
some ways to limit that; as an example, service areas - fire
service areas and recreation service areas - can't be combined,
even if the local governing body supports it. Residents of each
individual service area must vote separately to accomplish that,
which is an impediment at times to efficiencies. He offered
that for some of these issues, it takes a long time and a great
deal of work to convince and educate the public about the best
way to go forward. All these issues will be controversial and
contentious.
4:39:15 PM
CHAIR KITO concurred with Commissioner Navarre's statement of
the issue and expressed that he wishes to invite the Alaska
Municipal League (AML) to the committee to address state versus
municipal responsibilities for services. He suggested the
commissioner or DCRA staff would be willing to participate in
that discussion.
4:40:09 PM
REPRESENTATIVE BIRCH expressed that he has been heavily immerged
in this issue with six years of experience with local government
in Fairbanks and nine years in Anchorage. He opined that when
the constitution was drafted, the boroughs were not contiguous;
therefore, there were wide open spaces in Alaska. He offered
his understanding that the legislature serves as an assembly for
the unorganized borough areas; the legislature is empowered
under the constitution to do whatever is necessary to provide
the governance and take necessary action. He suggested that
there is a mechanism in place, but it has not been exercised
very often.
COMMISSIONER NAVARRE agreed that there is a mechanism in place
for the unincorporated areas; however, many of the incorporated
areas also evolved over time - the areas were expanded or
combined. This was accomplished at times by combining or
overlaying existing structures: in Anchorage there is a police
service area and areas outside the police service area,
including the highway corridor, which is the main arterial
between Kenai and Anchorage. He said that last year, the
legislature passed a bill under which the state formed a highway
corridor service area on the Kenai Peninsula, because there was
a recognized need; the communities' emergency services wanted to
serve their local communities but were spending most of their
time with people passing through on the corridor. He mentioned
that Cooper Landing was the area he was referencing. He stated
that there are many challenges in Alaska.
4:42:05 PM
REPRESENTATIVE JOSEPHSON suggested that if the legislature wants
to reform the power of boroughs to insist they provide certain
services and move those services to the boroughs, it would
consume the entire session and involve a slate of bills. He
asked if his assessment is correct.
COMMISSIONER NAVARRE replied, "You're absolutely right." He
maintained that it is a complex set of issues; it should be done
through dialog, communication, and consensus with local
governments, because otherwise there would be too many
obstacles.
4:43:17 PM
CHAIR KITO referred to slide 12, the ANS history and forecast,
and related the following experience: he was working near the
Kaparic River Oil Field at the time it was under development; it
was very exciting, even though it was significantly smaller than
the Prudhoe Bay oil discovery; it was the last big find in
Alaska. There is potential with the opening of the Arctic
National Wildlife Refuge (ANWR); there is potential with
exploration of the former National Petroleum Reserve-Alaska
(NPR-A); however, no concrete large amounts of oil have been
discovered. He opined that being hopeful is good but being
practical is also good, that is, to make sure Alaska has a way
to move forward. He suggested that if Alaska finds another
large oil reserve, it should approach it like Norway has done -
ensure services are provided, then bolster the permanent fund
with the excess revenue the state receives.
4:46:14 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:46 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HLAC DOLWD Overview 1.24.18.pdf |
HL&C 1/24/2018 3:15:00 PM |
Dept. of Labor Overview |
| HLAC DCCED Overview 1.24.18.pdf |
HL&C 1/24/2018 3:15:00 PM |
Dept. of Commerce |