Legislature(2019 - 2020)Anch LIO Lg Conf Rm
04/24/2020 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
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| Start | |
| Presentation(s): the Economic Impacts of Covid-19 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
Anchorage, Alaska
April 24, 2020
3:17 p.m.
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
No previous action to record
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.
REPRESENTATIVE GERAN TARR
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions during the presentation on
the economic impacts of COVID-19.
REPRESENTATIVE BART LEBON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions during the presentation on
the economic impacts of COVID-19.
LAURIE WOLF, President/Chief Executive Officer
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/Chief Executive Officer
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 (ISER), 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 said 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 the
paycheck protection program (PPP) with an average amount of
$190,000. This represents 22 percent of all firms in Alaska
(slide 7).
3:27:16 PM
DR. 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
unemployment insurance filings, that number has already been
exceeded (slide 8). Using similar assumptions, Dr. 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
account for the decline 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.
DR. GUETTABI indicated the share of 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].
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 five
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 Alaskan businesses
only represents 6 percent of the states annual payroll,
indicating a need for multiple rounds of aide to keep them
afloat; further, 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.
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.
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 GERAN TARR, Alaska State Legislature, 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 BART LEBON, Alaska State Legislature, 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 allows
for grants in the $10,000, $5,000, and $2,000 range based on
business size and 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 |