02/21/2018 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Economic Trends & Entrepreneurship in Alaska | |
| HB306 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 306 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 21, 2018
3:21 p.m.
MEMBERS PRESENT
Representative Sam Kito, Chair
Representative Adam Wool, Vice Chair
Representative Andy Josephson
Representative Louise Stutes
Representative Chris Birch
Representative Gary Knopp
Representative Colleen Sullivan-Leonard
MEMBERS ABSENT
Representative Mike Chenault (alternate)
Representative Bryce Edgmon (alternate)
COMMITTEE CALENDAR
PRESENTATION: ECONOMIC TRENDS & ENTREPRENEURSHIP IN ALASKA
- HEARD
HOUSE BILL NO. 306
"An Act relating to disbursement options under the Public
Employees' Retirement System of Alaska and the Teachers'
Retirement System of Alaska for participants in the defined
contribution plan; and providing for an effective date."
- MOVED HB 306 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 306
SHORT TITLE: PERS/TERS DISTRIBUTIONS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/24/18 (H) READ THE FIRST TIME - REFERRALS
01/24/18 (H) L&C, FIN
02/12/18 (H) L&C AT 3:15 PM BARNES 124
02/12/18 (H) Heard & Held
02/12/18 (H) MINUTE(L&C)
02/21/18 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
DAN ROBINSON, Research Chief
Research and Analysis Section
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Gave presentation on Trends in Alaska's
Employment and Population.
DR. MOUHCINE GUETTABI
Assistant Professor of Economics
Institute of Social and Economic Research (ISER)
University of Alaska, Anchorage
Anchorage, Alaska
POSITION STATEMENT: Presented on the Alaska recession and on
"How Does Alaska's Spending Compare?"
JON BITTNER, Executive Director
Alaska Small Business Development Center (SBDC)
University of Alaska, Anchorage Business Enterprise Institute
Anchorage, Alaska
POSITION STATEMENT: Presented on "Small Business Trends and the
Alaska Economy".
SYLVAN ROBB, Deputy Commissioner
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Testified in the hearing on HB 306.
KATHY LEA, Deputy Director
Division of Retirement and Benefits
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Answered questions in the hearing on HB
306.
ACTION NARRATIVE
3:21:05 PM
CHAIR SAM KITO called the House Labor and Commerce Standing
Committee meeting to order at 3:21 p.m. Representatives
Sullivan-Leonard, Stutes, Knopp, Birch, Wool, Josephson, and
Kito were present at the call to order.
^Presentation: Economic Trends & Entrepreneurship in Alaska
Presentation: Economic Trends & Entrepreneurship in Alaska
3:21:55 PM
CHAIR KITO announced that the first order of business would be a
presentation on Economic Trends & Entrepreneurship in Alaska.
3:22:10 PM
DAN ROBINSON, Research Chief, Research and Analysis Section,
Department of Labor & Workforce Development (DLWD), gave a
presentation on Trends in Alaska's Employment and Population [in
committee packets]. He explained his department produces,
together with federal partners, most of the data on those
trends. He said that the Institute of Social and Economic
Research (ISER) is among the most sophisticated users of the
data his department gathers. He added the information does not
change with the change in administration.
3:24:11 PM
MR. ROBINSON addressed slide 2, "Job losses are smaller but
continue." He said he often hears that the recession is over
and also that the state is in a downward spiral. He stated
neither are true. He explained the state loses jobs at a lower
rate than in mid-2016 but continues to lose jobs.
3:25:20 PM
REPRESENTATIVE SULLIVAN-LEONARD asked about the significant
difference between June 2016 and June 2017 in the graph.
MR. ROBINSON answered his group had compared June 2016 to June
2017 and it had seemed there was almost a return to zero.
3:26:47 PM
REPRESENTATIVE WOOL asked whether the comparisons were always
between the same months in subsequent years.
MR. ROBINSON answered in the affirmative. He explained
comparing like months controlled for seasonality.
REPRESENTATIVE WOOL asked whether the spikes were seasonal or
happenstance.
MR. ROBINSON answered the numbers were fairly small and one
should not read too much into the month-to-month variation.
3:28:02 PM
REPRESENTATIVE BIRCH pointed to the chart on slide 2 and
remarked there are about 27 bars below zero showing job losses.
He asked whether those losses are cumulative.
MR. ROBINSON answered the numbers are not showing cumulative job
losses. He added there are ways to calculate cumulative losses,
currently at around 12,000, but the graph was not showing that.
REPRESENTATIVE BIRCH asked what the chart was showing.
MR. ROBINSON answered that it showed the duration and severity
of job losses.
REPRESENTATIVE BIRCH asked what "minus 9,000" for September 2016
meant.
MR. ROBINSON answered there were 9,000 fewer jobs than in the
prior year.
3:29:45 PM
MR. ROBINSON said the 27 months in the graph are significant.
He added the group had looked at other states and found that 259
times states had gone through job losses and that 75 percent of
the time, they had recovered in 2 years. The current downturn
has extended into unusual territory. He explained business
cycles versus structural change. He gave the examples of Oregon
and Florida and explained that often there is a structural
change. Florida had lost 330,000 construction jobs and that
economic driver that had contributed to economic growth in
Florida went away. He referred to the economic shock in the
current recession.
3:33:19 PM
MR. ROBINSON addressed slide 3, "Recently released data: wage
losses through Q3 2017". He stated, "We are still heading
south."
? 2015 Q3 wages: $4.76 billion
? 2016 Q3 wages: $4.72 billion
? 2017 Q3 wages: $4.55 billion
? Alaska employers paid about $210 million less in
wages in the third quarter of 2017 than in the same
quarter two years earlier.
3:33:46 PM
REPRESENTATIVE KNOPP said it looked to him like the state is
"going north" by $210 million.
MR. ROBINSON answered the total wages for Q3 were $4.45 billion
so the graph shows $210 million less. He added that hundreds of
millions of dollars in the graphs are significant.
3:34:54 PM
REPRESENTATIVE BIRCH asked whether the gross for the year was
$18 billion.
MR. ROBINSON replied that roughly the state had an $18 billion
economy. He added that the third quarter was the biggest
quarter of the year.
REPRESENTATIVE BIRCH remarked that the previous year the state
had an income tax proposal and asked how that would be applied
to the $18 billion.
MR. ROBINSON said he could not speak to the tax.
REPRESENTATIVE BIRCH asked whether the calculation included out-
of-state paychecks.
MR. ROBINSON answered in the affirmative and added that the data
was very helpful as it contained unemployment insurance and
captured almost all employers.
REPRESENTATIVE WOOL asked whether the total job loss would keep
growing.
MR. ROBINSON answered there is a difference between resumed
growth and recovery. He said resuming growth will matter. He
spoke to what it took for other states to recover and said that
for some states it took longer. He remarked that Alaska in the
1980s recovered fast but "that seems unlikely this time."
3:38:16 PM
MR. ROBINSON spoke to slide 4, "Long View: 1970-2018 jobs
history." He said Alaska had a long period of stability and had
"plowed right through" two national recessions.
REPRESENTATIVE BIRCH asked whether the graph includes the
military positions.
MR. ROBINSON answered that it does not.
REPRESENTATIVE BIRCH remarked the military factor is huge,
especially in Fairbanks, Alaska.
MR. ROBINSON said the data set included only civilian military.
He added that fishermen aren't included because they are self-
employed, but seafood processors are included.
REPRESENTATIVE BIRCH commented that those groups must include
thousands of people.
MR. ROBINSON said those groups aren't covered by unemployment.
He said military data is collected separately every year.
3:41:02 PM
CHAIR KITO commented that a military installation would not
count as economic growth except in the case of the F-35s in
Fairbanks, Alaska, for which people would be coming into the
state.
MR. ROBINSON said that was correct. He said Fairbanks is one
place where economic growth is forecast for 2018.
3:41:56 PM
REPRESENTATIVE WOOL surmised that the military base population
would appear as growth, and any military dependents who work
outside the base would appear.
MR. ROBINSON answered that any non-military income would appear,
including on military bases.
3:42:29 PM
MR. ROBINSON pointed to the graph on slide 4 and explained that
the current recession is not as deep as the recession in the
1980s and that if the forecast is correct, it could extend
beyond the recession in the 1980s.
MR. ROBINSON spoke to slide 5, "Our Statewide 2018 job
forecast." He remarked that forecasting for 2018 was difficult.
3:43:52 PM
MR. ROBINSON moved on to slide 6, "Zooming in on a key
industry":
• Alaska had 15,000+ oil and gas jobs in late 2014.
• Alaska had about 9,600 oil and gas jobs by late
2017.
• Oil jobs fell by more than a third in about three
years.
MR. ROBINSON moved to slide 7, "Other sectors with big losses
(2015-17)":
• Construction -15.3 percent
• State Government -7.4 percent
• Prof. & Business Services -7.3 percent
3:45:12 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether there was any
forecast for job increases.
MR. ROBINSON said the data was available and showed that
healthcare was the only sector that was up. He added that local
and tribal governments were lower. He said healthcare job
growth was forecast to be slower in 2018.
MR. ROBINSON spoke to slide 8 "The relationship between Alaska's
employment and population". He stated that in the 1980s the
state had quite a big jump in population.
3:47:51 PM
MR. ROBINSON spoke to slide 9, "Almost constant growth since
WWII". He pointed out that there were four years in which the
population did not grow. He pointed to one year of population
loss when the pipeline was completed.
REPRESENTATIVE WOOL asked about the state population without
birth and death data.
MR. ROBINSON answered there was a population overview. He added
history has shown growth and it is unlikely the state will lose
large numbers of population.
3:51:21 PM
MR. ROBINSON moved on to slide 10, "AK has largest migration
flows in U.S." He pointed out that Alaska has the biggest
migration flow due to the pull of economic opportunity and
quality of life. He added people also leave the state at a
higher rate due to climate and other factors. He remarked
migration flows affect a lot of other things, and that there is
an unusual amount of "coming and going" in Alaska.
3:53:24 PM
CHAIR KITO asked whether the numbers include military migration.
MR. ROBINSON answered in the affirmative.
3:53:33 PM
REPRESENTATIVE BIRCH commented that according to the graph, it
looked like the population grew between 1990 and 2016.
MR. ROBINSON answered the migration number netted to a little
bit less than zero. He explained that if there were exactly
matching births and deaths, then the population would have
shrunk a little.
REPRESENTATIVE BIRCH said he understood the coming but not the
going part. He said he did not understand the 12 percent
number.
MR. ROBINSON answered that the point is to show that there is an
unusual amount of coming and going in the state.
3:55:50 PM
MR. ROBINSON addressed slide 11, "Takeaways".
? Economic downturn (recession) that began in late
2015 continues, though the losses are smaller.
? Population has been quite stable, although 2017 saw
a small loss and net migration has been negative for
the last five years and migration is especially
important in Alaska.
? We've forecasted another year of job loss in 2018,
although there's more uncertainty than usual about
economic direction.
3:57:02 PM
REPRESENTATIVE WOOL spoke to the job losses shown in slide 2.
MR. ROBINSON answered that as long as the state is losing jobs,
the job market continues to get smaller.
REPRESENTATIVE WOOL spoke to migration. He surmised that job
gain would be coupled with positive migration.
MR. ROBINSON answered that it is correct that when the economy
is growing, net migration tends to be positive.
3:59:45 PM
DR. MOUHCINE GUETTABI, Assistant Professor of Economics,
Institute of Social and Economic Research (ISER), University of
Alaska, Anchorage, presented on the Alaska recession and on "How
Does Alaska's Spending Compare?" He said he had been asked to
provide a comparison and contrast with Mr. Robinson's
presentation. He described his reports and stated he wouldn't
be able to do any analysis without the Department of Labor &
Workforce Development (DLWD) work. He added that broadly
speaking he agreed with Mr. Robinson. He said he thought the
decline in job losses is good but does not mean a recovery. He
stated he thought the state was far from recovery.
DR. GUETTABI explained the oil and gas industry affects Alaska
through two channels. He said the difficulty is that the
industry affects the Alaska economy through the private sector
through support sector and household dependent jobs. He
indicated that the report shows the comparison between June 2014
to June 2017 for oil and gas and as of June 2017 oil and gas
employment was 75 percent what it was in 2014. He added that
means that economic engine is much smaller. He stated that
professional services are at 90 percent of what they were in
2014, and state government employment is at 95 percent. He
referred to the sectors hit in the first wave which are still
considerably below what they were a few years ago.
DR. GUETTABI explained that he had expected more losses for 2017
and he said he was surprised Alaska didn't get hit harder. He
said he thinks it's good that the losses are slowing and the
fact that the state lost fewer jobs than expected is due to the
fact that local government and support sectors have held up
well. He suggested the question will be how much some of these
businesses can sustain if economic activity is lower for the
next two and a half years. He said he thinks in the next year
the state will lose a little less than 1 percent of jobs. He
said he wondered about the engine of recovery, as healthcare is
not a basic sector that generates money from the outside and
therefore is not the way out of the recession and cannot be the
future economic engine.
4:08:13 PM
CHAIR KITO asked about sector changes or economic drivers that
have pulled other states out of their recessions.
DR. GUETTABI answered that he doesn't believe that Alaska has a
diversification problem, but Alaska has a leakage problem. He
indicated a lot of value leaves the state. He added he thought
the state had to think very critically about the existing supply
chain and ensure that a lot of the money that is generated in
the state stays in the state. He mentioned that private capital
spending in the state is down $2.5 billion (indisc.). He said
it is much more important to examine the ways in which the state
can plug some of the holes. He stated the Permanent Fund (PF)
is larger than Alaska's gross domestic product (GDP) and asked
whether the PF should play some role in private economic
activity if the economic engine is lost. He reiterated that he
thinks the supply chain is the "lower hanging fruit" as opposed
to new industry, and that the question about the financial
resource playing some role in the economy is worthy of
investigation.
4:11:50 PM
REPRESENTATIVE JOSEPHSON spoke to policy uncertainty and said
that there is a lost opportunity with not making economic
decisions. He asked how history can gauge what the outcome
might have been had the state marched forward with confidence
instead of passivity.
DR. GUETTABI said the exercise that he did was to attempt to get
closer an answer. He said he often gets the question of whether
"doing nothing is costless." He added he often finds that policy
uncertainty around gubernatorial elections causes private
investment declines of up to 15 percent. He said the losses
from foregone investment are of the same magnitude as the
potential losses stemming from taxes or government cuts. He
concluded that waiting is not costless and does result in people
sitting in the sidelines and in missed opportunities resulting
in a lingering recession.
4:17:06 PM
REPRESENTATIVE WOOL asked whether the next big oil discovery is
what Dr. Guettabi means by supply chain and whether an increase
in oil flow will "right the ship."
DR. GUETTABI answered that supply chain refers to what
businesses buy in order to produce what they are producing. He
said he refers to the leakage as the amount of money that leaves
the state after being produced in the state. He said he thinks
the strategy is feasible and starts at the local level with
communities that are resource-rich. He remarked that new oil
discoveries were not going to happen overnight. He questioned
whether the state envisions oil and gas as big as it was 10
years ago, and if not, what the state thinks the next step for
Alaska should be.
4:22:24 PM
JON BITTNER, Executive Director, Alaska Small Business
Development Center (SBDC), University of Alaska, Anchorage
Business Enterprise Institute, presented on a PowerPoint on
"Small Business Trends and the Alaska Economy". He said that
over 99 percent of businesses in Alaska are small business.
Small businesses employ about 142,761 people, up from 141,316 in
2016. He added that small businesses represent about 70 percent
of all exporters.
4:25:07 PM
MR. BITTNER described the Alaska Small Business Development
Center (SBDC) in slide 3:
Who is the Alaska SBDC?
Operating in Alaska over 30 years
• 17 employees + 4 student researchers
• Seven regional centers across the state:
• Anchorage
• Mat-Su
• Fairbanks
• Kenai Peninsula
• Homer
• Juneau
• Ketchikan
• Annually serve:
• 1,000 small businesses
• 3,000 workshop attendees
• 2,500 youth entrepreneurs
4:26:05 PM
MR. BITTNER continued to slide 4, "What Did We See in
2017?":
• Record breaking numbers:
• Over $18 million in capital infusion
• 6,250 advising hours
• Nearly 1,000 clients served
• 460 new jobs
• 155 new businesses started
• Over 50 communities served
• Other facts:
• 74 percent of all exporters are small
businesses
• 20 percent of small businesses are minority
owned
4:27:36 PM
MR. BITTNER moved to slide 5, "2018 Is Starting Off
Strong":
• Clients:
o New: 333
o Total: 654
• New jobs: 309
• New Business Starts: 47
• Capital infusion: $5,793,533
• Stage of business new clients
o Pre-venture: 217
o Startups: 38
o In-business: 79
*SBDC FY2018, Q1:Oct. Dec. 2017
4:28:20 PM
MR. BITTNER continued to slide 6, "2018 Alaska SBDC Small
Business Survey":
• What
o Series of 40 questions sent to small
businesses across the state
• Who
o Past four years of Alaska SBDC clients
o Over 350 respondents
o Why
o Designed to measure Alaska's small business
climate and perspective
4:28:32 PM
REPRESENTATIVE KNOPP asked how many of those 2,500 clients are
still in business.
MR. BITTNER answered that under 30 businesses had gone out of
business. He added that some were due to personal life events.
He disclosed that those who were no longer operating may also
have been less incentivized to answer the survey.
4:29:23 PM
MR. BITTNER spoke to slide 7, "2018 Survey Highlights":
• Top challenges facing small business in Alaska
o Finding Funding
o High Cost of Operating in Alaska (Shipping
and Health Care)
o The Economy/Political Uncertainty
• Top challenges to hiring new employees
o Lack of qualified applicants (hard and soft
skills)
o Culture fit
4:31:37 PM
REPRESENTATIVE WOOL asked about the generational culture fit in
employees.
MR. BITTNER answered there is a generational disconnect. He
said there is a shift in the younger generation and how they
value things. He said the older generations look at a career as
a stable thing, whereas the average for a millennial is three or
four years.
4:33:40 PM
REPRESENTATIVE BIRCH said everyone remembers their first job.
He asked whether there was any erosion in the ability of young
adults in summer jobs.
MR. BITTNER answered that he thinks the upcoming generation will
be more entrepreneurial generations. He spoke to the Lemonade
Day put on by his organization. He said that Nome has the
highest grossing lemonade stands. He added there are a lot of
millennials and the younger generation who are very interested
in creating their own jobs as well as baby boomers who want to
continue working.
4:36:13 PM
MR. BITTNER continued to cover 2018 Survey Highlights on slides
8-10:
• State economy
Do you believe the state's economy will improve
over the next 12 months?
o 79 percent of respondents were either
pessimistic or unsure about the state's
economy over the next 12 months
• Local economy
Do you believe your local economy will improve
over the next 12 months? ?
o 66 percent felt the same about their local
economy.
4:38:32 PM
MR. BITTNER moved to slide 9:
• Most small business are optimistic about the
coming year
• 64 percent predicted their financial situation
would be good or very good in 12 months
• Only 10 percent predicted their financial
situation would be poor or very poor
MR. BITTNER addressed slide 10:
• Revenues: 2016 vs. 2017
o 58 percent of small business respondents
report their 2017 revenues were the same or
higher than 2016.
o Only 20 percent reported lower revenues in
2017.
MR. BITTNER addressed the final slide, "What Does It
Mean?":
• The Alaskan economy is changing
• Small businesses are projecting growth in 2018
• There are several barriers to business growth in
Alaska that need to be addressed
• The SBDC is working to grow Alaska's businesses
and support policymakers across the state
4:39:56 PM
REPRESENTATIVE WOOL asked for confirmation that the respondents
to the survey were clients whom the SBDC had helped within the
previous four years.
MR. BITTNER answered in the affirmative.
REPRESENTATIVE WOOL surmised that brand new business owners may
have a different view of the economy from those who had been in
business for ten years.
HB 306-PERS/TERS DISTRIBUTIONS
4:40:44 PM
CHAIR KITO announced that the final order of business would be
HOUSE BILL NO. 306, "An Act relating to disbursement options
under the Public Employees' Retirement System of Alaska and the
Teachers' Retirement System of Alaska for participants in the
defined contribution plan; and providing for an effective date."
4:40:58 PM
SYLVAN ROBB, Deputy Commissioner, Department of Administration
(DOA), testified in the hearing on HB 306. She reminded that HB
306 moves to take the disbursement options for retirees from
statute to regulations, so the department can be more nimble as
more options for disbursements come out. She added that this
process will allow for public comment in the process.
4:41:45 PM
REPRESENTATIVE BIRCH asked about the net effect of the proposed
bill.
MS. ROBB answered that HB 306 would allow the department to
respond more quickly to retirees and to change things more
quickly.
REPRESENTATIVE BIRCH asked for a concrete example.
4:43:15 PM
KATHY LEA, Deputy Director, Division of Retirement and Benefits,
Department of Administration (DOA), answered questions in the
hearing on HB 306. She answered that one of the options the
Alaska Retirement Management Board (ARMB) is looking at is a
guaranteed lifetime withdrawal option. She explained the
employee can go into the plan about ten years before they retire
and can pay an insurance premium to ensure their balance. In
this way, the highest balance that they receive will be what the
monthly benefit payment will be based on. She added that this
allows retirees to enjoy the upside of the market but protects
them from the downside. She explained that this is a very
important consideration when preparing participants for
retirement readiness. She added the option was not currently
included in the options in stature so could not be added to the
PERS/TERS defined contribution plans. She described the
qualified lifetime annuity contract. She said it had a specific
definition with the Internal Revenue Service (IRS) and defers
the annuity until age 80.
4:45:32 PM
REPRESENTATIVE KNOPP asked who else in the private or
governmental sector was offering similar benefits.
MS. LEA replied that she could not list the states but that many
states were doing the same. She added many corporations in the
private sector are also offering similar retirement plans to
their employees.
4:46:28 PM
CHAIR KITO said public testimony was still open from a previous
hearing. Upon ascertaining the no one was available to testify,
he closed public testimony on HB 306.
4:46:49 PM
REPRESENTATIVE WOOL moved to report HB 306 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, it was so ordered.
4:48:01 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:48 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| UAA ISER - Research Summary Comparative Spending.pdf |
HL&C 2/21/2018 3:15:00 PM |
Presentation ISER |
| UAA ISER - What Do We Know About the Alaska Recession.pdf |
HL&C 2/21/2018 3:15:00 PM |
Presentation ISER |
| DOLWD Jobs Forecast Presentation 2.21.18.pdf |
HL&C 2/21/2018 3:15:00 PM |
Presentation DOLWD |
| AKSBDC 2017 Survey.pdf |
HL&C 2/21/2018 3:15:00 PM |
AKSBDC |
| AKSBDC Statewide One Pager.pdf |
HL&C 2/21/2018 3:15:00 PM |
AKSBDC |
| AKSBDC Pres - H. L&C.pdf |
HL&C 2/21/2018 3:15:00 PM |
AKSBDC |