Legislature(2017 - 2018)BUTROVICH 205

01/16/2018 01:30 PM LABOR & COMMERCE

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Audio Topic
02:10:10 PM Start
02:10:36 PM Presentation: Alaska Employment Forecast for 2018
02:40:27 PM Panel Discussion
03:46:31 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to Immediately Following Session --
+ How Can We Create More Jobs? TELECONFERENCED
Dept. of Labor & Workforce Development
Presentation: Alaska Employment Forecast for 2018
Paloma Harbour, Administrative Services Director
Panel Discussion:
Mouhcine Guettabi, PhD, Institute of Social and
Economic Research
Robert Venables, Southeast Conference
Nolan Klouda, Certified Economic Developer from
Center for Economic Development
Brian Holst, Juneau Economic Development Council
Doug Ward, Vigor Alaska
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                        January 16, 2018                                                                                        
                           2:10 p.m.                                                                                            
                                                                                                                                
                             DRAFT                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Mia Costello, Chair                                                                                                     
Senator Kevin Meyer                                                                                                             
Senator Gary Stevens                                                                                                            
Senator Berta Gardner                                                                                                           
Senator Peter Micciche                                                                                                          
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Senator Click Bishop                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION: ALASKA EMPLOYMENT FORECAST FOR 2018                                                                               
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PANEL DISCUSSION: HOW TO CREATE MORE JOBS                                                                                       
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
PALOMA HARBOUR, Director                                                                                                        
Division of Administrative Services                                                                                             
Department of Labor and Workforce Development (DOLWD)                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Delivered a PowerPoint presentation titled                                                                
"Alaska Employment Forecast for 2018."                                                                                          
                                                                                                                                
GREG CASHEN, Acting Commissioner                                                                                                
Department of Labor and Workforce Development (DOLWD)                                                                           
Juneau, Alaska,                                                                                                                 
POSITION STATEMENT:  Participated in the  PowerPoint presentation                                                             
titled "Alaska Employment Forecast for 2018."                                                                                   
                                                                                                                                
MOUCHCINE GUETTABI, PhD, Assistant Professor of Economics                                                                       
Institute of Social and Economic Research                                                                                       
University of Alaska Anchorage                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Participated in  the panel  discussion about                                                             
how to create more jobs.                                                                                                        
                                                                                                                                
ROBERT VENABLES, Executive Director                                                                                             
Southeast Conference                                                                                                            
Juneau, Alaska,                                                                                                                 
POSITION STATEMENT:  Participated in  the panel  discussion about                                                             
how to create more jobs.                                                                                                        
                                                                                                                                
MEILANI SCHIJVENS, Past Executive Director                                                                                      
Southeast Conference                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Participated in  the panel  discussion about                                                             
how to create more jobs.                                                                                                        
                                                                                                                                
NOLAN KLOUDA, Executive Director                                                                                                
Center for Economic Development                                                                                                 
University of Alaska Anchorage                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Participated in  the panel  discussion about                                                             
how to create more jobs.                                                                                                        
                                                                                                                                
BRIAN HOLST, Executive Director                                                                                                 
Juneau Economic Development Council                                                                                             
Juneau, Alaska,                                                                                                                 
POSITION STATEMENT:  Participated in  the panel  discussion about                                                             
how to create more jobs.                                                                                                      
                                                                                                                                
DOUG WARD, Director                                                                                                             
Shipyard Development for Vigor Alaska                                                                                           
Ketchikan Shipyard                                                                                                              
Ketchikan, Alaska,                                                                                                              
POSITION STATEMENT:  Participated in  the panel  discussion about                                                             
how to create more jobs.                                                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
2:10:10 PM                                                                                                                    
                                                                                                                                
CHAIR MIA COSTELLO called the  Senate Labor and Commerce Standing                                                             
Committee meeting  to order at 2:10  p.m. Present at the  call to                                                               
order were Senators Meyer, Stevens,  Gardner, and Chair Costello.                                                               
Senator Micciche arrived soon thereafter.                                                                                       
                                                                                                                                
^Presentation: Alaska Employment Forecast for 2018                                                                              
       Presentation: Alaska Employment Forecast for 2018                                                                    
                                                                                                                                
2:10:36 PM                                                                                                                    
CHAIR COSTELLO  stated that  today the  committee would  focus on                                                               
the  question of  how to  create more  jobs. Acting  Commissioner                                                               
Greg  Cashen   with  the  Department   of  Labor   and  Workforce                                                               
Development (DOLWD) would present  the Alaska Employment Forecast                                                               
for 2018,  with assistance from Administrative  Services Director                                                               
Paloma Harbour.  Following the presentation, the  committee would                                                               
hear from a group of panelists.                                                                                                 
                                                                                                                                
2:12:12 PM                                                                                                                    
GREG  CASHEN,  Acting  Commissioner,   Department  of  Labor  and                                                               
Workforce  Development (DOLWD),  Juneau,  introduced himself  and                                                               
Ms.  Harbour. He  thanked  the committee  for  the invitation  to                                                               
present an  overview of the  employment forecast for  2018, which                                                               
was produced  by the department's Research  and Analysis Section.                                                               
He reported that the  key takeaway for 2018 is that  it will be a                                                               
stronger year than 2017.                                                                                                        
                                                                                                                                
He displayed a  bar graph that provides an  historical context to                                                               
the  current state  recession and  highlighted that  Alaska's job                                                               
numbers  have  been  quite  stable since  the  early  1990s.  The                                                               
current job losses, while serious,  have been smaller than during                                                               
the 1980s recession. In the 1980s,  9 percent or 20,700 jobs were                                                               
lost, whereas  3.5 percent or 11,700  jobs have been lost  in the                                                               
current  recession. The  current recession  has lasted  26 months                                                               
and  is ongoing,  while  the 1980s  recession  lasted 25  months.                                                               
Recovery  following the  earlier recession  was strong,  but it's                                                               
unclear what  the recovery will  look like following  the current                                                               
recession. He  posited that  recovery is  unlikely until  a long-                                                               
term fiscal  plan resolves the current  uncertainty which hinders                                                               
growth.                                                                                                                         
                                                                                                                                
CHAIR COSTELLO asked  what metrics the department  uses to define                                                               
a recession.                                                                                                                    
                                                                                                                                
2:13:57 PM                                                                                                                    
PALOMA  HARBOUR, Director,  Division of  Administrative Services,                                                               
Department of  Labor and  Workforce Development  (DOLWD), Juneau,                                                               
explained that  the department defines  a recession as  more than                                                               
two quarters of job loss.                                                                                                       
                                                                                                                                
SENATOR STEVENS asked how to identify the end of a recession.                                                                   
                                                                                                                                
MS.  HARBOUR said  DOLWD's "Trends"  publication states  that the                                                               
first sign is continued wage growth.                                                                                            
                                                                                                                                
CHAIR  COSTELLO asked  if regaining  the jobs  that were  lost is                                                               
part of the measure.                                                                                                            
                                                                                                                                
MS. HARBOUR said  no; an official recovery is  identified as once                                                               
the  numbers turn  positive. She  added that,  "You're not  fully                                                               
recovered, obviously, until you reach the pre-recession levels."                                                                
                                                                                                                                
2:15:31 PM                                                                                                                    
ACTING COMMISSIONER  CASHEN reported that losses  were deepest in                                                               
2016 when the  economy lost 6,300 jobs, primarily in  the oil and                                                               
gas industry and state government.  The losses continued in those                                                               
sectors in 2017  and spread to the closely  related industries of                                                               
construction  and professional  & business  services. Losses  are                                                               
expected to  spread in 2018  to stores, bars, restaurants,  and a                                                               
variety of other areas.                                                                                                         
                                                                                                                                
2:16:16 PM                                                                                                                    
SENATOR MICCICHE joined the committee.                                                                                          
                                                                                                                                
SENATOR  GARDNER  asked  if  slowing   job  loss  numbers  is  an                                                               
indication that the economy is headed toward recovery.                                                                          
                                                                                                                                
MS. HARBOUR said yes, and  DOLWD economists foresee potential job                                                               
gains toward the end of 2018.                                                                                                   
                                                                                                                                
ACTING COMMISSIONER  CASHEN reported that job  loss overall seems                                                               
to be tapering. The industries  that were affected initially have                                                               
started to stabilize  at lower levels. Strong  health care growth                                                               
and  record  tourism kept  overall  job  losses from  being  even                                                               
deeper.  Oil   price  forecasts  are  uncertain,   but  they  are                                                               
predicted to remain in the $55  to $65 per barrel range. He noted                                                               
that the  unexpected Sam's Club  store closures is  evidence that                                                               
forecasts cannot anticipate every loss or gain.                                                                                 
                                                                                                                                
2:17:54 PM                                                                                                                    
ACTING COMMISSIONER  CASHEN said state government  first felt the                                                               
pinch in late 2014 when falling  tax revenue from the oil and gas                                                               
industry  decimated state  revenues. State  government jobs  were                                                               
cut  in early  2015 as  pressure mounted  to reduce  expenses. In                                                               
2018,  state  government is  likely  to  lose an  additional  2.1                                                               
percent  or  500 jobs.  He  cautioned  that continuing  calls  to                                                               
reduce  state  government  costs  and the  state's  large  budget                                                               
deficit will continue to put downward pressure on job numbers.                                                                  
                                                                                                                                
He reported that the oil  and gas industry maintained record high                                                               
employment levels  through most  of 2015 but  lost 2,900  jobs in                                                               
2016. The industry is expected  to lose an additional 5.1 percent                                                               
or 500 jobs in 2018, which  is one-third of the loss sustained in                                                               
2017. Multiple future projects have  been announced, but they are                                                               
longer  term  and  the  potential employment  boost  in  2018  is                                                               
expected to be minor. A bright  spot is that oil prices are above                                                               
$60 per barrel, additional exploration  and maintenance is on the                                                               
horizon,  and oil  production  is forecast  to  increase for  the                                                               
third year in 2018.                                                                                                             
                                                                                                                                
2:19:40 PM                                                                                                                    
ACTING  COMMISSIONER  CASHEN said  the  capital  budget is  lower                                                               
again in fiscal year 2018,  and oil and gas construction projects                                                               
not likely to increase this  year. The construction industry lost                                                               
200 jobs  in 2015  followed by  job losses of  1,400 in  2016 and                                                               
1,200  in 2017.  The forecast  for  2018 is  a loss  of 500  more                                                               
construction jobs.  Employment in  the professional  and business                                                               
services industry started  to fall in late 2015,  plunged in 2016                                                               
with a loss  of 1,600 jobs, followed by another  600 jobs lost in                                                               
2017. This  industry is  forecasted to lose  another 400  jobs in                                                               
2018 due to  continuing low demand for  services. The substantial                                                               
upstream losses eventually reached  the industries that depend on                                                               
local  demand and  expendable income  such  as shopping  centers,                                                               
theaters,  nonprofits   that  depend  on  donations,   bars,  and                                                               
restaurants.                                                                                                                    
                                                                                                                                
                                                                                                                                
He reported  that Anchorage lost 3  percent or 5,000 jobs  in the                                                               
past two years, which depressed  total employment to 2011 levels.                                                               
The job  loss for 2018 is  forecasted to be more  modest, and the                                                               
municipality could stop shedding jobs by the end of the year.                                                                   
                                                                                                                                
CHAIR COSTELLO asked how accurate the forecasts have been.                                                                      
                                                                                                                                
MS. HARBOUR  said DOLWD's predictions have  been fairly accurate.                                                               
Projected  job losses  did start  in 2016,  although the  numbers                                                               
were  more significant  than anticipated.  Slightly fewer  losses                                                               
were forecast for 2017 and that too was accurate.                                                                               
                                                                                                                                
CHAIR COSTELLO  asked Ms.  Harbour to follow  up with  the actual                                                               
versus the projected numbers.                                                                                                   
                                                                                                                                
2:22:19 PM                                                                                                                    
SENATOR  MICCICHE observed  that the  presentation had  dated oil                                                               
prices. He requested updated data.                                                                                              
                                                                                                                                
COMMISSIONER CASHEN said the figures  were taken from the January                                                               
2018 "Trends"  publication. He acknowledged  that oil  prices are                                                               
somewhat higher now.  He related that he looked  before coming to                                                               
the capitol this afternoon and learned it is $69 per barrel.                                                                    
                                                                                                                                
SENATOR MICCICHE countered that it is $70 per barrel.                                                                           
                                                                                                                                
ACTING COMMISSIONER  CASHEN said  he'd be happy  to check  on the                                                               
reference.                                                                                                                      
                                                                                                                                
ACTING COMMISSIONER  CASHEN continued  to discuss  the historical                                                               
and  predicted Anchorage  job losses.  He said  Anchorage is  the                                                               
state  headquarters  for  the  oil  and  gas,  construction,  and                                                               
professional &  business services  industries. This is  where the                                                               
largest  share of  resident  oil industry  workers  on the  North                                                               
Slope  come  from.  Thus,  the   Anchorage  forecasts  for  these                                                               
industries mirror the statewide forecast.                                                                                       
                                                                                                                                
Anchorage's leisure and hospitality  sector depends on both local                                                               
consumption  and tourism.  Weaker  local demand  resulted in  100                                                               
jobs  lost in  2017.  The forecast  for 2018  is  similar with  a                                                               
projected loss  of 200  jobs. Health  care has  usually generated                                                               
the largest number  of new jobs in Anchorage. There  were 800 new                                                               
jobs  in this  sector, some  of  which were  related to  Medicaid                                                               
expansion. In 2018, 600 new jobs are forecasted.                                                                                
                                                                                                                                
2:24:06 PM                                                                                                                    
ACTING  COMMISSIONER  CASHEN  said employment  in  the  Southeast                                                               
region is  forecasted to  decline slightly less  in 2018  than it                                                               
did in 2017. The loss in 2018  is forecasted to be 0.6 percent or                                                               
200 jobs, compared  to 0.7 percent or 250 jobs  that were lost in                                                               
2017. Tourism is the reason that  job losses in 2017 and 2018 are                                                               
not  worse.  Southeast  saw  more  than  a  million  cruise  ship                                                               
visitors  in 2017,  and 2018  is anticipated  to be  even better.                                                               
This  helps the  trade,  transportation, utility,  and leisure  &                                                               
hospitality sectors.                                                                                                            
                                                                                                                                
ACTING  COMMISSIONER  CASHEN  said  that over  one-third  of  the                                                               
employment in Southeast is government.  The region lost more than                                                               
700  state  government  jobs  between  2014  and  2017,  and  the                                                               
forecast  for 2018  is a  loss  of another  100 jobs.  Commercial                                                               
fishing  is a  significant  part of  the  Southeast economy,  but                                                               
harvesting jobs  are not  included in  the forecast  because they                                                               
are  identified as  self-employment  jobs. Most  of the  region's                                                               
salmon harvest  is pink salmon  and the  2017 run was  lower than                                                               
expected. The forecast  for 2018 is about two-thirds  of the 2017                                                               
catch.                                                                                                                          
                                                                                                                                
2:25:47 PM                                                                                                                    
ACTING COMMISSIONER CASHEN said  that employment in the Fairbanks                                                               
North  Star Borough  peaked in  2012  and has  fallen every  year                                                               
since then. The  2017 job count was the lowest  it has been since                                                               
2005. The economic picture is expected  to improve in 2018 due to                                                               
an  increase  in  military   construction.  Preparation  for  two                                                               
squadrons  of  F-35s for  Eielson  Air  Force  Base is  the  most                                                               
positive economic  development for  Fairbanks and  Alaska overall                                                               
in  2018. Unlike  other regions,  the  professional and  business                                                               
services  sector was  not affected  by the  oil and  construction                                                               
declines.  There have  been job  gains the  past two  years. This                                                               
sector is forecasted to grow again  in 2018, due in large part to                                                               
preparations for the F-35 squadrons.  Health care, which has been                                                               
a dynamic  industry in Fairbanks  for the last decade,  slowed in                                                               
2017  and  is expected  to  be  flat in  2018.  Job  cuts at  the                                                               
University of Alaska Fairbanks resulted  in the borough's largest                                                               
employment losses in 2017, and cuts will continue in 2018.                                                                      
                                                                                                                                
2:27:22 PM                                                                                                                    
SENATOR  STEVENS asked  if he  had  government job  data for  all                                                               
regions. "For  Anchorage and Fairbanks, is  it substantially less                                                               
than one-third?"                                                                                                                
                                                                                                                                
ACTING  COMMISSIONER  CASHEN  offered   to  follow  up  with  the                                                               
information.                                                                                                                    
                                                                                                                                
MS. HARBOUR calculated that federal,  state, and local government                                                               
employment  makes   up  18.6  percent  of   total  employment  in                                                               
Anchorage.  She offered  to follow  up with  the information  for                                                               
Fairbanks.                                                                                                                      
                                                                                                                                
2:28:28 PM                                                                                                                    
ACTING  COMMISSIONER  CASHEN  advised  that in  August  2017  the                                                               
department  added  a set  of  economic  measures to  its  monthly                                                               
"Trends" publication that  offer insight into key  aspects of the                                                               
state's  economic  health.  He   said  no  single  measure  tells                                                               
everything  about   an  economy,   but  a  handful   of  relevant                                                               
indicators warrant constant attention,  and many other indicators                                                               
should be regularly monitored.                                                                                                  
                                                                                                                                
He  explained  that these  measures  are  presented as  "economic                                                               
gauges" that quickly  show whether the most recent  data puts the                                                               
state  above or  below its  10-year average.  Some of  the gauges                                                               
(like the  ones shown  on slide 10  for job  growth, unemployment                                                               
rate,  and  wage  growth)   provide  additional  context  through                                                               
historical benchmarks and comparisons to the U.S. economy.                                                                      
                                                                                                                                
CHAIR COSTELLO  asked what metrics  the department used  prior to                                                               
this  addition  and if  there  was  a  reason they  weren't  used                                                               
before.                                                                                                                         
                                                                                                                              
MS. HARBOUR clarified  that the department has  been tracking the                                                             
information  and  it  has  been available  on  the  Research  and                                                             
Analysis  website.  What  is  new  is  that  the  information  is                                                             
included in the "Trends" publication.  Putting the information in                                                             
one location makes it easier for everyone.                                                                                      
                                                                                                                                
SENATOR MICCICHE asked her to  comment on why the 1980s recession                                                               
was far deeper and more widespread than the current recession.                                                                  
                                                                                                                                
MS. HARBOUR  said part of  the reason  is that the  1980s economy                                                               
was based primarily  on oil and gas followed  by construction and                                                               
government. The economy today is much broader and more balanced.                                                                
                                                                                                                                
SENATOR  MICCICHE  noted  that  unemployment  in  Alaska  is  the                                                               
highest  in the  country. He  asked if  that's not  generally the                                                               
case due to seasonal employment. "I'd  like a better way to gauge                                                               
that impact as well," he added.                                                                                                 
                                                                                                                                
MS. HARBOUR agreed that Alaska  generally has a high unemployment                                                               
rate due  to the high  seasonality of work. The  ten-year average                                                               
unemployment  rate for  Alaska  is 7.1  percent.  She noted  that                                                               
another  economic  gauge  shown  on the  next  slide  is  overall                                                               
unemployment insurance claims. Surprisingly,  those claims are at                                                               
record low  levels. The  December issue  of "Trends"  talks about                                                               
why there is such a discrepancy, she said.                                                                                      
                                                                                                                                
2:32:35 PM                                                                                                                    
ACTING COMMISSIONER  CASHEN said  the unemployment rate  has long                                                               
been  one of  the  most prominent  measures  of economic  health.                                                               
While Alaska's  unemployment rate is  the highest in  the nation,                                                               
it is  only one-tenth of  one percent above its  10-year average.                                                               
As slide 11 shows, unemployment  claims have reached record lows.                                                               
The  December 2017  "Trends" publication  discussed  some of  the                                                               
possible reasons for this disparity.                                                                                            
                                                                                                                                
He  said  Alaskans have  been  paying  attention to  banking  and                                                               
housing in  the current recession  because these  industries were                                                               
devastated  in the  1980s recession.  Many expected  another real                                                               
estate crash,  but that hasn't  happened. The housing  market has                                                               
slowed,  but  it hasn't  declined.  Sales  prices and  rents  are                                                               
relatively  stable, and  foreclosures  are down.  He opined  that                                                               
this  is  likely due  to  the  relatively steady  population  now                                                               
compared to the recession in the 1980s.                                                                                         
                                                                                                                                
2:34:03 PM                                                                                                                    
ACTING COMMISSIONER  CASHEN said total population  dropped 15,000                                                               
during the 1980s  recession. Net migration has  been negative for                                                               
the past five  years, but the losses have been  offset by natural                                                               
increases.                                                                                                                      
                                                                                                                                
In 2017,  the population  decreased one-third  of one  percent or                                                               
2,629 people.  This was the first  decrease in 29 years.  What is                                                               
most  telling  in  the  2017  population  estimates  is  that  as                                                               
Alaska's population  ages, natural increases  may not be  able to                                                               
cover the  fluctuations. The working population  (18-64) declined                                                               
1.2 percent (the  fifth year of decline), while the  65 and older                                                               
group grew by  nearly 5 percent. The  under-18 population dropped                                                               
just  0.4  percent and  has  changed  little  over the  last  two                                                               
decades.                                                                                                                        
                                                                                                                                
CHAIR COSTELLO asked how many Alaskans are wage earners.                                                                        
                                                                                                                                
MS. HARBOUR estimated that for  the last several months the labor                                                               
force numbers  have been  around 359,000.  She clarified  that is                                                               
people who  are either working  or want  to work. She  offered to                                                               
follow up with the number of people who are actively working.                                                                   
                                                                                                                                
CHAIR COSTELLO said she was looking for that number.                                                                            
                                                                                                                                
2:36:24 PM                                                                                                                    
ACTING  COMMISSIONER CASHEN  displayed a  table showing  the 2017                                                               
population change by [economic region],  borough and census area.                                                               
He noted  that 20 of Alaska's  29 boroughs and census  areas lost                                                               
population between  2016 and 2017.  Anchorage and  Fairbanks lost                                                               
the  most.  The  Municipality  of  Anchorage  lost  1,454  people                                                               
followed  by the  Fairbanks North  Star Borough  that lost  1,216                                                               
people.  The Matanuska-Susitna  Borough  grew  the most,  gaining                                                               
1,612  people.   Of  the  state's  six   economic  regions,  only                                                               
Anchorage/Mat-Su gained population over  the period (+158), while                                                               
the Interior lost  the most (-1,291). Net  migration was negative                                                               
in  all   six  regions.  He  advised   that  complete  population                                                               
estimates  are available  on the  Research  and Analysis  Section                                                               
website.  The site  also includes  estimates  for census  tracts,                                                               
school  districts,  and  Native Regional  Corporations.  It  also                                                               
includes estimates  by age  and sex for  each borough  and census                                                               
area. He  advised that new  2017 estimates by race  and ethnicity                                                               
will be available in July 2018.                                                                                                 
                                                                                                                                
2:37:50 PM                                                                                                                    
ACTING   COMMISSIONER  CASHEN   concluded  the   presentation  by                                                               
highlighting  that  every two  years  the  Research and  Analysis                                                               
Section produces a 10-year employment  projection by industry and                                                               
occupation.  The 2016  to 2026  projection will  be completed  by                                                               
July 2018.                                                                                                                      
                                                                                                                                
CHAIR  COSTELLO asked  what top  three jobs/industries  in Alaska                                                               
grow  the economy  and  if they  are expected  to  change in  the                                                               
foreseeable future.                                                                                                             
                                                                                                                                
MS. HARBOUR offered  to follow up with the  information. She said                                                               
she also wanted to mention that  this recovery might be slow. For                                                               
the foreseeable future, employment  opportunities will be through                                                               
replacement openings as the workforce population ages out.                                                                      
                                                                                                                                
2:39:50 PM                                                                                                                    
CHAIR COSTELLO  thanked the presenters and  encouraged members to                                                               
submit questions  to her  office, and she  would forward  them to                                                               
the department.                                                                                                                 
                                                                                                                                
2:40:19 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
^Panel Discussion                                                                                                               
                        Panel Discussion                                                                                    
                                                                                                                                
2:40:27 PM                                                                                                                    
CHAIR COSTELLO  reconvened the meeting  and stated that  the next                                                               
order of  business would be a  panel discussion on how  to create                                                               
more jobs.                                                                                                                      
                                                                                                                                
She noted that Senator Bishop was in the room.                                                                                  
                                                                                                                                
She welcomed the panelists: Brian  Holst with the Juneau Economic                                                               
Development Council,  Dr. Mouchcine  Guettabi with  the Institute                                                               
of Social  and Economic  Research, Nolan  Klouda with  the Center                                                               
for Economic  Development, Robert Venables and  Meilani Schijvens                                                               
with Southeast Conference,  and Doug Ward with  Vigor Alaska. She                                                               
asked each panelist to give a  brief response or comment based on                                                               
the prior  presentation, and then  she would open  the discussion                                                               
for questions.                                                                                                                  
                                                                                                                                
2:45:32 PM                                                                                                                    
BRIAN  HOLST,  Executive  Director, Juneau  Economic  Development                                                               
Council,  introduced  himself  and  gave   a  shout  out  to  the                                                               
Department of  Labor and Workforce Development  for the excellent                                                               
data it  provides. In particular,  the new gauge makes  it easier                                                               
to access information.                                                                                                          
                                                                                                                                
MR. HOLST said  that different areas of the  state have different                                                               
problems  related to  employment and  job creation.  For example,                                                               
Juneau  has lost  jobs while  still  enjoying one  of the  lowest                                                               
unemployment rates in  the state. But something to  keep in mind,                                                               
he said, is  that there is often a mismatch  between the kinds of                                                               
jobs  that are  needed in  the economy  and the  skillset of  the                                                               
available workers.  For example, there  are people in  Juneau who                                                               
can't find  a job  even though there  are jobs  available. Either                                                               
they don't have  the needed skillset, or they don't  want to take                                                               
any of  the jobs that  are available.  He emphasized the  need to                                                               
build the capacity  to create the economy that is  desired in the                                                               
future. The university has been  focusing on this in anticipation                                                               
of  the economy  that is  coming  and is  preparing Alaskans  for                                                               
those jobs.                                                                                                                     
                                                                                                                                
2:47:24 PM                                                                                                                    
MOUCHCINE  GUETTABI,  PhD,   Assistant  Professor  of  Economics,                                                               
Institute of  Social and Economic Research,  University of Alaska                                                               
Anchorage, seconded Mr. Holst's  thoughts about the Department of                                                               
Labor  and  Workforce  Development.   He  noted  that  ISER  also                                                               
produces forecasts.                                                                                                             
                                                                                                                                
DR.  GUETTABI  said  he  agrees with  the  direction  of  DOLWD's                                                               
findings but would  urge caution in interpreting  the data. While                                                               
job losses have slowed, he said  he didn't see a recovery anytime                                                               
soon. Unless  oil prices increase  dramatically, Alaska  lacks an                                                               
economic engine that would result  in significant job growth that                                                               
would bring back  the 11,000 to 12,000 jobs that  have been lost.                                                               
There  is also  potential downside  risk. While  local government                                                               
employment  has held  up very  well, it's  unclear how  long that                                                               
will last.                                                                                                                      
                                                                                                                                
He said  health care  has added a  lot of jobs,  but it's  not an                                                               
economic base. Except for federal  transfers, it doesn't bring in                                                               
outside dollars. He described it  as problematic to think about a                                                               
recovery  stemming from  health care.  He agreed  with Mr.  Holst                                                               
that there  has been  an uneven distribution  of pain  across the                                                               
state,  and that  slowing  job  loss is  not  an indication  that                                                               
Alaska is headed to recovery.                                                                                                   
                                                                                                                                
DR.  GUETTABI emphasized  the importance  of thinking  critically                                                               
about the intersection between fiscal  and economic decisions. He                                                               
recalled the  back of  the envelope analysis  that was  done last                                                               
year  that   looked  at  the  potential   costs  of  uncertainty.                                                               
According  to  that  estimate,  between  $200  million  and  $600                                                               
million in  private capital spending  was lost because  of fiscal                                                               
uncertainty. He  reiterated his call for  caution in interpreting                                                               
the data and urged careful thinking  about the state economy in a                                                               
way that allows creative use  of the permanent fund. The greatest                                                               
concern is  to identify the  next economic engine if  the heydays                                                               
of oil and gas are in  the past. He concluded saying he's looking                                                               
for the answer to the question of what sector will spur growth.                                                                 
                                                                                                                                
2:50:37 PM                                                                                                                    
NOLAN   KLOUDA,   Executive   Director,   Center   for   Economic                                                               
Development, University  of Alaska  Anchorage, said he  wanted to                                                               
add to DOLWD's  figures on employment by  discussing the specific                                                               
role of new and small businesses in job creation.                                                                               
                                                                                                                                
He  said  preliminary  numbers  show  that  in  2017  over  1,000                                                               
employer  businesses were  started,  and they  added about  4,600                                                               
jobs to the  economy. He noted that overall  statewide job losses                                                               
that  year were  3,600.  He acknowledged  that  trends over  time                                                               
don't necessarily follow the cycle  of job losses that affect the                                                               
rest of the economy.                                                                                                            
                                                                                                                                
MR. KLOUDA reported  that the Center for  Economic Development is                                                               
digging into  the data on  the role  of very young  businesses in                                                               
the  economy. When  they looked  at the  10-year period  prior to                                                               
2014, they found  that new businesses created,  on average, 5,200                                                               
jobs  per  year.  A  review  of  mature  businesses  during  that                                                               
timeframe,  it showed,  on average,  job losses  each year.  That                                                               
shows  the important  role of  new  businesses when  it comes  to                                                               
contributing jobs to the economy, he said.                                                                                      
                                                                                                                                
He  informed the  committee that  the  Kauffman Foundation  ranks                                                               
states according  to entrepreneurship.  According to  their data,                                                               
Alaska ranks among  the top two or three states  for the share of                                                               
the population  that starts  a business.  However, it  ranks near                                                               
the bottom for scaling up businesses.                                                                                           
                                                                                                                                
MR.  KLOUDA concluded  asking that  the role  of young  and small                                                               
businesses be considered in any  discussion about the economy and                                                               
job creation.                                                                                                                   
                                                                                                                                
2:53:16 PM                                                                                                                    
CHAIR COSTELLO  said, "You're  speaking right  up my  alley." She                                                               
related that  she introduced equity crowd  investing legislation,                                                               
and one  result was that  a business  in Sitka started.  She said                                                               
that Alaskans are natural entrepreneurs,  and the Juneau Economic                                                               
Development    Council   Innovation    Summit   provided    great                                                               
opportunities to talk to creative business men and women.                                                                       
                                                                                                                                
2:53:46 PM                                                                                                                    
SENATOR STEVENS  asked for  examples of  the kinds  of businesses                                                               
that  are included  as  new, small  employer  businesses. Are  we                                                               
talking about retail businesses and fishing businesses?                                                                         
                                                                                                                                
MR. KLOUDA  said they  are businesses in  all sectors.  He didn't                                                               
have  a   list  of  the   most  common  industries   among  young                                                               
businesses, but  they include health care,  construction, retail,                                                               
professional services, food, and accommodations.                                                                                
                                                                                                                                
2:54:34 PM                                                                                                                    
ROBERT  VENABLES,   Executive  Director,   Southeast  Conference,                                                               
Juneau,   addressed   previous   questions  saying   that   state                                                               
government  employment in  Juneau is  about 14  percent. He  also                                                               
clarified that  Anchorage employment  numbers do not  include the                                                               
military. He said  Southeast is a mirror of what  is happening in                                                               
the  rest  of the  state,  and  2017  was difficult.  Tourism  in                                                               
Skagway  was  a  bright  spot,  but the  brightest  light  is  in                                                               
Ketchikan where there is manufacturing.                                                                                         
                                                                                                                                
He said  the greatest barrier  to the  state getting out  of this                                                               
recession is  the lack of  certainty and a stable  environment in                                                               
which to invest.  He posited that permitting,  the tax structure,                                                               
and the  role of oil and  gas is a statewide  issue. He cautioned                                                               
that  tax changes  the  last  seven of  twelve  years  is not  an                                                               
environment that  encourages investment  from industry.  There is                                                               
opportunity  for job  growth in  the timber  industry, but  there                                                               
must be certainty.                                                                                                              
                                                                                                                                
MR.  VENABLES   said  there  is  bright   opportunity  for  small                                                               
businesses  to gain  a  foothold and  create  new products.  Over                                                               
1,000 acres  of mariculture permits  are pending, but  he wonders                                                               
how  fast  permits  are  processed.  He said  there's  a  lot  of                                                               
opportunity in  Southeast as  a base  for manufacturing  and this                                                               
will take legislative leadership to set the foundation.                                                                         
                                                                                                                                
He  noted   the  Southeast  Conference  publications   that  were                                                               
distributed to the committee.                                                                                                   
                                                                                                                                
2:57:42 PM                                                                                                                    
SENATOR GARDNER  asked him  to elaborate on  the question  of how                                                               
long  it  will take  for  the  1,000  mariculture permits  to  be                                                               
processed.                                                                                                                      
                                                                                                                                
MR. VENABLES said  timing is everything and the cuts  in staff at                                                               
the Department of  Natural Resources and other  agencies is cause                                                               
for  concern.  "Sometimes  these  permits  are  not  getting  put                                                               
through as quickly as we would hope for."                                                                                       
                                                                                                                                
SENATOR  MEYER  said  he  didn't   think  there  was  any  timber                                                               
harvesting left in Southeast.                                                                                                   
                                                                                                                                
MR. VENABLES  replied industry has been  cut so much the  last 20                                                               
years that  many people don't  think it still exists.  However, a                                                               
small  viable  industry does  exist  in  the Ketchikan/Prince  of                                                               
Wales  area. It's  a  very  small percent  of  the overall  state                                                               
economy but  it's 100 percent  of their economy. He  related that                                                               
he's  been working  with people  in the  Trump administration  to                                                               
help provide  more certainty for timber  businesses in Southeast.                                                               
He explained that  it's about much more than just  cutting down a                                                               
tree.   Logging   roads   connect   communities,   help   provide                                                               
transmission  for   energy  distribution,  and   provide  outdoor                                                               
recreation. Timber  has a multi-level impact  on communities, and                                                               
it's barely hanging on.                                                                                                         
                                                                                                                                
2:59:42 PM                                                                                                                    
SENATOR  MEYER asked  if the  new administration  is providing  a                                                               
glimmer of hope that more trees will be cut.                                                                                    
                                                                                                                                
MR. VENABLES  said yes. He  expressed optimism that  someone from                                                               
the administration would talk to  Southeast Conference next month                                                               
and articulate the administration's position.                                                                                   
                                                                                                                                
SENATOR  MEYER  said  he  understands   that  all  the  trees  in                                                               
Southeast  are  second growth.  "If  so,  is timber  a  renewable                                                               
resource?" he asked.                                                                                                            
                                                                                                                                
MR. VENABLES  confirmed that timber  is a renewable  resource and                                                               
emphasized that there are many uses for the residuals.                                                                          
                                                                                                                                
SENATOR  MEYER asked  how important  mining is  in the  Southeast                                                               
region.                                                                                                                         
                                                                                                                                
MR. VENABLES said it is very  important and as with timber, those                                                               
are high-paying jobs. There are  two producing mines in Southeast                                                               
and a couple of more that are speculative.                                                                                      
                                                                                                                                
SENATOR  MICCICHE   asked  if   one  of   the  reasons   for  the                                                               
surprisingly low unemployment claims  is because younger families                                                               
are leaving.                                                                                                                    
                                                                                                                                
MR. VENABLES deferred the question to Ms. Schijvens.                                                                            
                                                                                                                                
3:02:49 PM                                                                                                                    
MEILANI  SCHIJVENS, Southeast  Conference, Juneau,  reported that                                                               
the population  in Southeast  declined by  1,500 people  over the                                                               
last two  years. Juneau sustained  about two-thirds of  the loss,                                                               
many  of  which  were  in   the  20-something  age  bracket.  She                                                               
reiterated  the   shout-out  to  the  Department   of  Labor  and                                                               
Workforce  Development  for  being   an  important  resource  for                                                               
accurate  data.  This  helps Southeast  Conference  provide  good                                                               
economic  information  to  its business  and  municipal  partners                                                               
every year. She said a report  card of a healthy economy looks at                                                               
the growth  of jobs, earnings,  and population.  Southeast Alaska                                                               
has seen declines in each of those areas.                                                                                       
                                                                                                                                
She  opined that  the  economic distress  is  clearly related  to                                                               
declining  oil prices  and production  and has  resulted in  deep                                                               
cuts to  jobs and spending  levels. Southeast has lost  700 state                                                               
government  jobs  over the  past  three  years, three-fourths  of                                                               
which were  from Juneau.  Lost wages totaled  a little  more than                                                               
$40 million  a year.  She emphasized  that these  are cornerstone                                                               
jobs  and when  they leave  there  is a  larger, rippling  effect                                                               
throughout other  sectors of the  economy. While there  are still                                                               
some  construction projects  going on,  there aren't  projects to                                                               
replace   them  because   of   reduced  capital   appropriations.                                                               
Architects and  engineers are immediately impacted,  and they are                                                               
concerned.                                                                                                                      
                                                                                                                                
In 2017,  the seafood industry  had its  worst year in  10 years.                                                               
It's  early in  2018 but  there is  already talk  of king  salmon                                                               
closures. The closure  last year was the first of  its kind since                                                               
1978. "That's obviously a concern," she said.                                                                                   
                                                                                                                                
MS. SCHIJVENS  said the  bright spots have  been in  health care,                                                               
mining, and  particularly in the  visitor industry. In  2017, the                                                               
visitor  industry became  the number  one  private industry  wage                                                               
provider  in  Southeast.  This was  somewhat  surprising  because                                                               
seafood  and  other  resource  extraction  industries  have  been                                                               
leaders in  the past.  There is also  quite a  wage differential.                                                               
The  average annual  wage  in the  mining  industry is  $100,000,                                                               
whereas the visitor industry pays  just less than $30,000 a year.                                                               
In  2017, cruise  ship passenger  capacity increased  6.2 percent                                                               
and is expected to increase another 7 percent in 2018.                                                                          
                                                                                                                                
3:07:57 PM                                                                                                                    
MS.  SCHIJVENS  explained  that each  year  Southeast  Conference                                                               
surveys  its business  owners and  operators  asking about  their                                                               
business  confidence.  This  confidence   index  is  included  in                                                               
Southeast  Conference's   projections.  As  expected,   the  most                                                               
business  confidence was  in the  visitor and  mining industries.                                                               
The  least  business  confidence  was  in  the  timber  industry,                                                               
followed by construction, engineering, and arts.                                                                                
                                                                                                                                
Skagway  and Ketchikan  are the  communities where  there is  the                                                               
most   business  confidence.   According  to   the  most   recent                                                               
population  figures, these  are  the only  boroughs in  Southeast                                                               
that did not  lose population. Confidence is  strong in Ketchikan                                                               
because of the  shipyard work that Vigor Alaska is  doing, and in                                                               
Skagway it's  the relationship between  the visitor  industry and                                                               
the  local  economy.  Business  confidence  is  the  weakest  and                                                               
declining in Sitka, Prince of Wales, and Juneau.                                                                                
                                                                                                                                
MS. SCHIJVENS  noted that  members had  copies of  the "Southeast                                                               
Alaska by  the Numbers  2017" publication  in their  packets. She                                                               
summarized  that  seven  of the  46  initiatives  that  Southeast                                                               
Conference  put  forward   are  priority  objectives.  Continuing                                                               
declines in population, jobs, and  total earnings are expected in                                                               
state   and  federal   government,  construction,   architects  &                                                               
engineering, the  retail sector, and timber.  Improvement in 2018                                                               
is projected for  the visitor industry, health  care, and mining.                                                               
The seafood industry will do better  than 2016 but not as well as                                                               
it did in 2017.                                                                                                                 
                                                                                                                                
3:10:29 PM                                                                                                                    
DOUG  WARD,  Director,  Shipyard Development  for  Vigor  Alaska,                                                               
Ketchikan  Shipyard, Ketchikan,  stated that  he doesn't  believe                                                               
that  Ketchikan is  in  a  recession. He  said  he's basing  that                                                               
statement on  information that  Rain Coast  Data provided  at the                                                               
Southeast Conference  meeting last  fall in  Haines. Most  of the                                                               
subsectors in  the maritime sector  in Southeast Alaska  show job                                                               
losses  or very  modest job  gains.  He pointed  to the  "Marine-                                                               
Related Construction"  subsector, which  was down 45  percent. By                                                               
comparison, the subsector "Ship  Building, Repair, Marinas" shows                                                               
job growth of 39 percent in Ketchikan.                                                                                          
                                                                                                                                
He related that Vigor Alaska started  in 1995 with 35 workers and                                                               
by the  end of 2018 the  workforce is expected to  be between 245                                                               
and 250 workers. In 2016, the  turnover rate in the workforce was                                                               
41 percent  and in 2017  it was down  to 33 percent.  The average                                                               
age of  the workforce is  37 and  90 percent are  Alaskans. Wages                                                               
are more than $60,000 per year,  which is $20,000 higher than the                                                               
average private sector wage in Ketchikan.                                                                                       
                                                                                                                                
MR. WARD explained that Vigor  Alaska became engaged in workforce                                                               
development 20  years ago to  learn and implement  good practices                                                               
for getting  a competitive  workforce. Over  the years  they have                                                               
partnered  with national  workforce  development nonprofits  like                                                               
Jobs for the  Future, the National Fund  for Workforce Solutions,                                                               
and the  National Skills Coalition.  These entities work  on ways                                                               
to  put people  to work  in  the U.S.  and Vigor  is using  those                                                               
strategies in Ketchikan.                                                                                                        
                                                                                                                                
Last   year   Vigor   implemented  a   registered   welder/fitter                                                               
apprenticeship that is self-paced  so that participants who enter                                                               
with a  lot of  knowledge, skills, and  abilities can  advance to                                                               
journeyman  status more  quickly. Behavioral  characteristics and                                                               
competencies are  evaluated and indexed to  the related technical                                                               
instruction  to make  sure the  workplace learning  opportunities                                                               
are matched. The workers have  a clear transparent career path to                                                               
advancement  at  Vigor in  Ketchikan.  This  helps reduce  worker                                                               
turnover.                                                                                                                       
                                                                                                                                
MR.  WARD  said  that  while   the  primary  focus  at  Vigor  is                                                               
shipbuilding  and repair,  the real  goal has  been to  introduce                                                               
advanced  manufacturing into  Alaska.  The  partnership with  the                                                               
Alaska Industrial  Development and  Export Authority  (AIDEA) has                                                               
been very successful, and both  the City and Borough of Ketchikan                                                               
participated   in  a   formal   public/private  partnership.   He                                                               
described manufacturing in  Alaska as a wide-open  field that has                                                               
a lot of overlap with  other industry sectors. Legislation making                                                               
its way  through Congress  is focused on  this future.  These are                                                               
Senate  Bill  1599,  the  BUILDS  Act,  and  its  partner,  House                                                               
Resolution  4115.  The  intent  of   both  bills  is  to  provide                                                               
significant funding  for creating  good practices and  work force                                                               
development.  Examples  include  registered  apprenticeships  and                                                               
sector partnerships. He concluded that  this is what Vigor Alaska                                                               
has  been  focused  on  for   the  last  20  years.  Should  this                                                               
legislation  pass,   there  will   be  money  to   replicate  the                                                               
strategies  that Vigor  has employed  in Ketchikan.  "I'm looking                                                               
forward  to a  future where  Alaska becomes  more self-sufficient                                                               
through  advanced  manufacturing,  providing the  manufacture  of                                                               
metal products that the state needs in its resource sectors."                                                                   
                                                                                                                                
CHAIR COSTELLO asked committee members if they had questions.                                                                   
                                                                                                                                
3:17:59 PM                                                                                                                    
SENATOR MEYER  pointed out  that Ketchikan is  a good  example of                                                               
the opportunities that  already exist in Alaska.  He stressed the                                                               
importance  of  looking  for additional  opportunities  including                                                               
those  that  could  be  brought  back  to  the  state  to  employ                                                               
Alaskans.                                                                                                                       
                                                                                                                                
SENATOR GARDNER asked Ms. Schijvens if  some of the job losses in                                                               
fisheries could  be due to  increased mechanization.  Noting that                                                               
the  "Southeast Alaska  2020 Economic  Plan"  indicates that  the                                                               
actual number  of fish  being caught is  declining, she  asked if                                                               
she knew if that is related to pollution or climate change.                                                                     
                                                                                                                                
MS. SCHIJVENS said  it's a struggle to understand  why fewer fish                                                               
are being  harvested, but there  is concern about  warming water.                                                               
In 2016, the prices were also lower.                                                                                            
                                                                                                                                
3:20:12 PM                                                                                                                    
SENATOR STEVENS  agreed with Dr. Guettabi's  cautionary statement                                                               
and his view  that health care is not an  economic base. He asked                                                               
him to expand on the statement  about using the permanent fund in                                                               
creative ways.                                                                                                                  
                                                                                                                                
DR.  GUETTABI said  most of  the conversation  over the  last few                                                               
years has been  about how to use savings to  fix the $2.5 billion                                                               
to $3 billion budget gap. If oil  and gas no longer play as large                                                               
a  role in  supporting  the  economy, he  wonders  what the  next                                                               
economic engine  will be. The  permanent fund is larger  than the                                                               
state's  GDP and  has been  invested  in diversified  instruments                                                               
that have nothing to do with  the Alaska economy, and it's grown.                                                               
The question he  poses to himself is that if  the conversation is                                                               
how  to  potentially fund  government,  should  there also  be  a                                                               
conversation about whether the permanent  fund should play a role                                                               
in creating jobs and potentially leveraging that wealth.                                                                        
                                                                                                                                
3:23:08 PM                                                                                                                    
SENATOR MICCICHE  said we're  not seeing the  same impacts  as in                                                               
the  1980s. He  added  that  he's trying  to  understand what  is                                                               
changing in the economy and how  that change can be encouraged so                                                               
it provides  more support and value  for the new Alaska  while it                                                               
continues  to   encourage  the  economic  benefits   of  the  old                                                               
petrochemical Alaska.                                                                                                           
                                                                                                                                
DR. GUETTABI  said this recession  is very different.  During the                                                               
1980s the  average age  was about  seven years  lower than  it is                                                               
now,   there  were   no  multigenerational   families,  and   the                                                               
outmigration was  considerably more significant. People  were not                                                               
as attached to place, and the  Alaska economy didn't have as many                                                               
sources of  money that weren't  contingent on the  performance of                                                               
oil and gas.  For example, the over-65 population  is much larger                                                               
and is  growing at  the fastest  rate in  the country.  He argued                                                               
that  this provides  a floor  for  the Alaska  economy. The  $2.5                                                               
billion to  $3 billion  that retirees receive  has nothing  to do                                                               
with the Alaska economy. It's not attached to the job losses.                                                                   
                                                                                                                                
To the  second point, he said  he tells his students  that Alaska                                                               
doesn't  have  a  diversification   problem;  it  has  a  leakage                                                               
problem. An  immense amount of  value is generated in  the state,                                                               
but a  lot of  it leaks out  through non-resident  employment and                                                               
the supply  chain. Much of  what businesses buy to  produce goods                                                               
and  services  in Alaska  is  purchased  in the  Lower-48.  Going                                                               
forward it's important  to figure out how to  localize the supply                                                               
chain  for   manufacturing  and  construction.  He   agreed  that                                                               
petrochemicals  will continue  to play  a role  along with  other                                                               
resources,  but there  is evidence  that a  tremendous amount  of                                                               
value  leaves  the  state.  Perhaps it's  time  for  a  statewide                                                               
mission to take the existing  economic bases and focus on keeping                                                               
more of that wealth.                                                                                                            
                                                                                                                                
3:27:21 PM                                                                                                                    
CHAIR COSTELLO  asked Mr. Holst  to address ways to  localize the                                                               
supply chain.                                                                                                                   
                                                                                                                                
MR. HOLST  said it's important  to understand that 90  percent of                                                               
the jobs  in an economy are  created from what already  exists in                                                               
the  economy.  For example,  Alaska  is  a  world leader  in  the                                                               
seafood industry, but the structure  of the industry is not based                                                               
in  the state.  Also, the  research dollars  that the  university                                                               
spends   aren't  necessarily   lined   up  where   you  see   the                                                               
opportunity.  The  message is  to  build  on the  strengths  that                                                               
already exist.                                                                                                                  
                                                                                                                                
He pointed  out that Alaska is  as resilient as it  is because of                                                               
the permanent  fund dividend. It  decreases poverty and  is great                                                               
for  the  economy  throughout  the state.  "When  we  talk  about                                                               
alternatives of using the permanent  fund dividend, that would be                                                               
my first choice is to make sure the dividend stays substantive."                                                                
                                                                                                                                
CHAIR  COSTELLO agreed  that growing  from within  and adding  to                                                               
what you're already good at provides great opportunity.                                                                         
                                                                                                                                
She  asked Mr.  Klouda to  address  ways to  localize the  supply                                                               
chain.                                                                                                                          
                                                                                                                                
MR. KLOUDA agreed  with Mr. Holst's point about  using the assets                                                               
we  already have.  He  said an  important  component of  Alaska's                                                               
local  assets is  the knowledge  base that  exists in  the state.                                                               
Alaska  is  now about  average  in  terms  of  the rates  of  the                                                               
population  that  have  a  college  education.  Alaska  also  has                                                               
certain  skills   embedded  within  the  economy.   He  mentioned                                                               
resource  extraction  that  requires  miners,  large  numbers  of                                                               
engineers,   and   professional   service   providers   who   are                                                               
knowledgeable  about  renewable  energy.  Alaska  also  has  deep                                                               
knowledge about  the ocean  economy. It is  a maritime  state and                                                               
its  seafood  industry and  marine  transport  industry have  new                                                               
opportunities  to innovate  technologically. Mariculture  is also                                                               
expanding.                                                                                                                      
                                                                                                                                
Assets that are based on  human capital are becoming increasingly                                                               
important  as   a  potential   source  of   entrepreneurship  and                                                               
innovation. Make  the most  of that  role to  add more  value in-                                                               
state, he said.                                                                                                                 
                                                                                                                                
CHAIR COSTELLO said most students don't  go on to college so it's                                                               
important that  they learn hands-on skills  before they graduate.                                                               
She agreed  with Mr. Ward  that it's  important to drill  down to                                                               
the level of the person seeking the job.                                                                                        
                                                                                                                                
She asked  Mr. Venables  to address ways  to localize  the supply                                                               
chain.                                                                                                                          
                                                                                                                                
3:33:33 PM                                                                                                                    
MR. VENABLES said  he appreciates the committee's  support of the                                                               
ARDOR program  over the years. It's  the boots on the  ground for                                                               
skills-based training.  Throughout the  state ARDORS  have helped                                                               
to spur over $200 million  in private investment into the various                                                               
regions. "We continue  to try to be that  bridge between industry                                                               
and opportunity."  Southeast has wood,  wind, water, and  fish so                                                               
it has  the building blocks  to create  an economy. He  cited the                                                               
wood chip  industry on Prince  of Wales that has  created biomass                                                               
heated greenhouses. It has displaced  imported diesel to heat the                                                               
schools  and created  learning opportunities  in math,  sciences,                                                               
technology, and engineering. Students are  paid to bring the wood                                                               
as part  of the curriculum  and they  sell the excess  produce in                                                               
the community. They learn and develop real world skills.                                                                        
                                                                                                                                
The  state also  has the  asset of  a growing  senior population.                                                               
These households  have a strong  sense of  place and many  do not                                                               
rely  on  daily  employment  for   their  income.  They  are  not                                                               
competing  for  jobs,  but  they do  require  services.  "It's  a                                                               
resource we  want to  be careful  with because it  adds a  lot of                                                               
stability."                                                                                                                     
                                                                                                                                
3:36:33 PM                                                                                                                    
CHAIR COSTELLO said  the notion that Alaskans have  roots did not                                                               
exist in  the 1980s recession.  There was less commitment  to the                                                               
state and people didn't have families holding them here.                                                                        
                                                                                                                                
She asked  Ms. Schijvens to  address ways to localize  the supply                                                               
chain.                                                                                                                          
                                                                                                                                
3:37:13 PM                                                                                                                    
MS. SCHIJVENS  said she appreciates  Dr. Guettabi's  comments and                                                               
the history  because the  state's economy was  set up  to benefit                                                               
large corporations  in the Lower-48, particularly  in the Seattle                                                               
area. She opined  that the state hasn't broken from  that as much                                                               
as it could.                                                                                                                    
                                                                                                                                
She said  there is a lot  of low-hanging fruit in  Southeast that                                                               
can be used  to expand the economy using  existing resources. She                                                               
noted that work is underway to  do away with the roadless rule in                                                               
the Tongass  National Forest. Getting  some of those  timber jobs                                                               
back would be  beneficial to the region. The  average visitor who                                                               
comes to  Southeast spends $487  and she believes they  should be                                                               
spending more. It's  a matter of figuring out  what products they                                                               
might  buy and  the  recreational  opportunities they're  looking                                                               
for. In  2016, 223 million  pounds of seafood was  extracted, but                                                               
most of it was exported  with minimal processing. The question is                                                               
how to increase the amount that is processed here.                                                                              
                                                                                                                                
3:39:02 PM                                                                                                                    
SENATOR STEVENS  highlighted the  issues standing  in the  way of                                                               
expanding the  seafood industry in  the state  including: seafood                                                               
processing  that's always  been  done out  of  state because  the                                                               
companies  are   owned  by  out-of-state   interests,  individual                                                               
fishermen who have  moved out of state for one  reason or another                                                               
and  permits  the  state  has   issued  that  now  are  owned  by                                                               
nonresidents. He asked if it's too late.                                                                                        
                                                                                                                                
MS.  SCHIJVENS said  she  doesn't have  an answer,  but  it is  a                                                               
concern that more  and more of the fishing  fleet is nonresident.                                                               
Recent  data  shows  that fishermen  from  Washington  state  are                                                               
extracting seafood at  a higher value than  all Alaskan fishermen                                                               
combined.                                                                                                                       
                                                                                                                                
3:40:26 PM                                                                                                                    
SENATOR GARDNER  shared that  several years  ago she  and Senator                                                               
Stevens  talked to  people  from France  who  participated in  an                                                               
experimental  program to  do more  seafood processing  in Alaska.                                                               
They finally gave up because  they couldn't find workers who were                                                               
prepared and trained  to do the work. She asked  Ms. Schijvens if                                                               
she was familiar with that experiment.                                                                                          
                                                                                                                                
MS. SCHIJVENS  confirmed that there  have been a number  of those                                                               
efforts through  the years, and  none have been  very successful.                                                               
The difference  now is  the interest  in local  food development.                                                               
There's been a burgeoning small  industry in Juneau over the past                                                               
five years  in locally prepared  foods. The focus  isn't entirely                                                               
on seafood products, but there  are more locally prepared seafood                                                               
products available for purchase and consumption.                                                                                
                                                                                                                                
CHAIR COSTELLO  asked Mr.  Ward to address  ways to  localize the                                                               
supply chain.                                                                                                                   
                                                                                                                                
3:41:58 PM                                                                                                                    
MR. WARD  said he  attended a  national conference  for workforce                                                               
solutions three years  ago that had the theme  "Learn, Share, and                                                               
Partner." Those words  are what Vigor Alaska has  used to develop                                                               
the physical and human infrastructure of the Ketchikan shipyard.                                                                
                                                                                                                                
He said the comments he's heard  today lead him to believe that a                                                               
new economy is attainable if  individual employers become engaged                                                               
and  adjust the  economic and  workforce development  policies in                                                               
this   state  to   facilitate  workplace   learning  and   career                                                               
opportunities for students, so they  can see what's out there. He                                                               
said  he also  likes the  idea  of using  the state's  incredible                                                               
wealth  to reset  the  way  we approach  our  students, and  even                                                               
include entrepreneurship  as part of the  high school curriculum.                                                               
He suggested looking at the  northern European approach to career                                                               
and  technical education  where  you build  jobs around  existing                                                               
economic opportunities.  The state  has that  opportunity through                                                               
advanced manufacturing. An example of  this can be found at SWAMC                                                               
(Southwest  Alaska Municipal  Conference)  that  has an  existing                                                               
manufacturing  extension partnership.  "Bring all  these together                                                               
in a statewide  consortium and I think we can  have a new economy                                                               
in this state," he concluded.                                                                                                   
                                                                                                                                
3:44:02 PM                                                                                                                    
CHAIR  COSTELLO described  the conversation  as a  starting point                                                               
and  encouraged  the  panelists to  pass  additional  information                                                               
along to the committee.                                                                                                         
                                                                                                                                
SENATOR  MICCICHE commented  on Alaska's  natural resources  that                                                               
leave  the state  largely  unprocessed  because of  uncompetitive                                                               
supply  chain  costs. He  said  the  panelists brought  up  great                                                               
ideas, but  it's not  possible to will  or legislate  that margin                                                               
away. He  said he'd like  to learn more  about the time  when the                                                               
margins were wider  and evaluate how to compete in  a free market                                                               
to bring those margins down.                                                                                                    
                                                                                                                                
CHAIR COSTELLO said  she's open to having  that conversation. She                                                               
mentioned the success of partnering  and the pitfalls of siloing.                                                               
"Our  challenges are  too great  to not  be working  together and                                                               
partnering." She said she shares  Mr. Ward's view that Alaska has                                                               
an optimistic future.                                                                                                           
                                                                                                                                
3:46:31 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Costello  adjourned the Senate Labor  and Commerce Standing                                                               
Committee meeting at 3:46 pm.                                                                                                   

Document Name Date/Time Subjects
Alaska Employment Forecast for 2018 - DOLWD for (S) LC - January 16th, 2018.pdf SL&C 1/16/2018 1:30:00 PM