Legislature(2017 - 2018)BUTROVICH 205
01/16/2018 01:30 PM Senate LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Employment Forecast for 2018 | |
| Panel Discussion | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
January 16, 2018
2:10 p.m.
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 numbers 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 rends" 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 economy today is
much broader and more balanced than it was in the 1980s when it
was based primarily on oil and gas followed by construction and
government.
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, he said, 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 (ISER), 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 2017publication 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 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 |