Legislature(2019 - 2020)BELTZ 105 (TSBldg)

02/14/2019 01:30 PM LABOR & COMMERCE

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Audio Topic
01:30:55 PM Start
01:31:50 PM Presentation: the State of Entrepreneurship in Alaska
02:29:15 PM Confirmation Hearing(s):
02:48:04 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Where Alaska Leads the Nation & Other Emerging
Sectors - Alaska is #1 in the Nation in the
Percentage of Women-Owned Employer Firms by
Nolan Klouda, Executive Director, UAA Center for
Economic Development
-- Testimony <Invitation Only> --
+ Consideration of Governor's Appointees: TELECONFERENCED
- Alcoholic Beverage Control Board
Charlie Cross - Rescheduled from 2/12/19
- Marijuana Control Board
Christopher Jaime - Rescheduled from 2/12/19
Scheduled but Not Heard
-- Public Testimony <Time Limit May Be Set> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                       February 14, 2019                                                                                        
                           1:30 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Lora Reinbold, Chair                                                                                                    
Senator Mia Costello, Vice Chair                                                                                                
Senator Click Bishop                                                                                                            
Senator Chris Birch                                                                                                             
Senator Elvi Gray-Jackson                                                                                                       
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
PRESENTATION: THE STATE OF ENTREPRENEURSHIP IN ALASKA BY THE                                                                    
CENTER FOR ECONOMIC DEVELOPMENT ~ UNIVERSITY OF ALASKA.                                                                         
     - HEARD                                                                                                                    
CONFIRMATION HEARING(S):                                                                                                        
Marijuana Control Board                                                                                                       
Christopher Jaime - Soldotna                                                                                                    
     - CONFIRMATION ADVANCED                                                                                                    
Alcoholic Beverage Control Board                                                                                              
Charlie Cross - Nome                                                                                                            
     - CONFIRMATION ADVANCED                                                                                                    
SENATE BILL NO. 16                                                                                                              
"An Act relating to certain alcoholic beverage licenses and                                                                     
permits; and relating to the bond requirement for certain                                                                       
alcoholic beverage license holders."                                                                                            
     SCHEDULED BUT NOT HEARD                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record.                                                                                                   
WITNESS REGISTER                                                                                                              
NOLAN KLOUDA, Executive Director                                                                                                
Center for Economic Development                                                                                                 
Business Enterprise Institute                                                                                                   
University of Alaska Anchorage                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Presented a PowerPoint on Entrepreneurship                                                                
in Alaska.                                                                                                                      
CHRISTOPHER JAIME, Appointee                                                                                                    
Marijuana Control Board                                                                                                         
Division of Corporations, Business and Professional Licensing                                                                   
Department of Commerce, Community and Economic Development                                                                      
Soldotna, Alaska                                                                                                                
POSITION STATEMENT: Testified as appointee to the Marijuana                                                                   
Control Board.                                                                                                                  
CHARLIE CROSS, Appointee                                                                                                        
Alcoholic Beverage Control Board                                                                                                
Division of Corporations, Business and Professional Licensing                                                                   
Department of Commerce, Community and Economic Development                                                                      
Nome, Alaska                                                                                                                    
POSITION STATEMENT: Testified as appointee to the Alcoholic                                                                   
Beverage Control Board.                                                                                                         
CHELSEA FOSTER, representing self                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified during the confirmation hearing                                                                 
for appointee Christopher Jaime to the Marijuana Control Board.                                                                 
CALEB SAUNDERS, Chief Executive Officer                                                                                         
Green Jar                                                                                                                       
Wasilla, Alaska                                                                                                                 
POSITION STATEMENT: Testified during the confirmation hearing                                                                 
for Christopher Jaime, appointee to the Marijuana Control Board.                                                                
RYAN TUNSETH, Owner                                                                                                             
Kenai, Alaska                                                                                                                   
POSITION   STATEMENT:   Testified    in   support   of   appointee                                                            
Christopher Jaime, appointee to the Marijuana Control Board.                                                                    
ACTION NARRATIVE                                                                                                              
1:30:55 PM                                                                                                                    
CHAIR  LORA  REINBOLD   called  the  Senate  Labor   and  Commerce                                                            
Standing Committee  meeting to order  at 1:30 p.m. Present  at the                                                              
call  to  order  were  Senators  Costello,  Bishop,  Gray-Jackson,                                                              
Birch, and Chair Reinbold.                                                                                                      
^PRESENTATION: The State of Entrepreneurship in Alaska                                                                          
  PRESENTATION: The State of Entrepreneurship in Alaska by the                                                              
Center for Economic Development, Business Enterprise Institute,                                                             
                     University of Alaska.                                                                                  
1:31:50 PM                                                                                                                    
CHAIR REINBOLD  announced that the  first order of  business would                                                              
be  a  presentation  titled, "The  State  of  Entrepreneurship  in                                                              
Alaska,"  by  the   Center  for  Economic   Development,  Business                                                              
Enterprise Institute, University of Alaska.                                                                                     
1:33:02 PM                                                                                                                    
NOLAN   KLOUDA,   Executive   Director,    Center   for   Economic                                                              
Development  (CED), Business Enterprise  Institute, University  of                                                              
Alaska  (UAA)  said  that  during  the  last  year  the  CED,  has                                                              
performed  a series  of studies  that highlight  entrepreneurship,                                                              
its economic importance,  and how entrepreneurs contribute  to the                                                              
state.  The center  also looked  at the demographics  of women  in                                                              
entrepreneurship and  emerging sectors in Alaska with  high growth                                                              
potential.  He  related that  the  CED  uses applied  research  to                                                              
institute    programs   and   services    to   assist    beginning                                                              
entrepreneurs. The  CED becomes  the generator of  information and                                                              
research, which it uses to inform its programming.                                                                              
1:34:29 PM                                                                                                                    
MR.  KLOUDA said  that  Senator Costello  took  leadership in  the                                                              
proclamation  that 2019 is  the "Year  of innovation."  The spirit                                                              
of this proclamation has helped shape some of the CED's work.                                                                   
He turned to  slide 2 of his  PowerPoint, "Q1 2017." He  said that                                                              
the  committee has  seen a  presentation on  Alaska's overall  job                                                              
status by from  the Department of Labor and  Workforce Development                                                              
(DOLWD). That data  suggests that Alaska is coming  out of a state                                                              
recession and forecasts  positive job growth this  year, after the                                                              
state  has seen  declining jobs  in  the last  few years.  Between                                                              
2017-2018, the  state lost 1,645  jobs but startups  created 5,100                                                              
jobs  in Alaska.  He  saw startup  businesses  do a  lot of  heavy                                                              
lifting  when it  comes to  creating  jobs and  prosperity in  the                                                              
private sector.                                                                                                                 
1:35:49 PM                                                                                                                    
MR. KLOUDA  turned to slides 3-4,  "New employer firms  in Alaska"                                                              
and "Alaska  jobs created  by new firms."  He reported  that about                                                              
1,100  new firms were  added in  2018. What  is interesting  about                                                              
this  is that  the recession  in the  last three  years in  Alaska                                                              
does  not seem  to  have  depressed  startups. Each  new  business                                                              
creates about  four or  five new  jobs with  an overall  effect of                                                              
creating  a total of  5,100 jobs  in 2018.  He estimated  that the                                                              
state currently has between 17,000-18,000 businesses.                                                                           
1:37:03 PM                                                                                                                    
MR. KLOUDA  turned to  slide 5, "Startups  Provide the  Net Margin                                                              
of New  Jobs." He referred  to a graph  that depicts ten  years of                                                              
data prior to the  recession. This graph shows that  the number of                                                              
jobs created  and lost in the  private sector is nearly  equal. He                                                              
characterized  it as a  churn in the  economy with new  businesses                                                              
expanding at the  same time other businesses are  closing. Startup                                                              
businesses  add the  net margin  of new  jobs to  the economy.  In                                                              
fact, almost by  definition, the startups are the  major source of                                                              
new jobs, he said.                                                                                                              
1:38:59 PM                                                                                                                    
SENATOR  BIRCH  asked him  if  he  had a  sense  of the  types  of                                                              
startup businesses  and whether these businesses  are food trucks,                                                              
engineering firms, or other types of businesses.                                                                                
MR. KLOUDA  answered that many new  businesses tend to  be related                                                              
to accommodation  and food service that are tied  to construction,                                                              
health  care, including  smaller  private  practices and  clinics,                                                              
and retail businesses associated with the visitor industry.                                                                     
1:40:09 PM                                                                                                                    
MR. KLOUDA  turned to slide 6,  "Only 50 percent of  firms survive                                                              
to  Year  5."  Often  people  wonder   whether  startup  jobs  are                                                              
valuable and enduring  if they close within the  first five years.                                                              
He referred  to the bar charts  that indicate that after  one year                                                              
about 25  percent of the businesses  have closed and by  the fifth                                                              
year, nearly half of the firms have closed.                                                                                     
1:41:25 PM                                                                                                                    
SENATOR  BISHOP asked  whether the  CED performs  exit surveys  to                                                              
determine the trend or causes of businesses that close.                                                                         
MR. KLOUDA  said some  data captures  the reasons that  businesses                                                              
fail.  Usually it  is a  combination of  cash-flow challenges  and                                                              
the cost of health  care insurance. However, often  the market and                                                              
customers  do   not  materialize   in  the  way   that  businesses                                                              
anticipated. He acknowledged  that a number of  inherent risks can                                                              
adversely  affect businesses,  including unrealistic  expectations                                                              
and financial management issues and decisions.                                                                                  
1:42:36 PM                                                                                                                    
MR.  KLOUDA  turned  to slide  7,  "But   surviving  firms  nearly                                                              
double in  size." He reported  that by  year five, the  firms have                                                              
doubled  in size, which  economists  call "up  or out." These  new                                                              
businesses will either  close or they will expand.  The net effect                                                              
is that business growth offsets any job losses when firms close.                                                                
1:43:28 PM                                                                                                                    
MR.  KLOUDA  turned  to slide  8,  "From  2005-2014,  young  firms                                                              
created 89  percent of  Alaska's net  private employment  growth."                                                              
Young  firms added  89 percent  of  Alaska's new  private jobs  to                                                              
Alaska's economy,  he said.  He characterized  this as  a pipeline                                                              
of jobs  that are  pushed into  the private  sector. This  is true                                                              
for any state and for the nation as a whole.                                                                                    
This slide  also emphasizes  why  programs like  the CED devote  a                                                              
lot of  its resources  to strengthen  entrepreneurship in  Alaska,                                                              
he said.  The CED works to  provide support for  entrepreneurs and                                                              
to create a more positive economic environment for them.                                                                        
1:44:50 PM                                                                                                                    
MR.  KLOUDA turned  to slide  9  to a  map of  Alaska showing  the                                                              
number  of  firms  per capita  in  Alaska.  He  acknowledged  that                                                              
Alaska is  diverse. The CED tends  to spend significant  effort on                                                              
the  rural  economy,  particularly  in  distressed  regions.  This                                                              
slide attempts  to identify  and measure parts  of the  state that                                                              
are  more  entrepreneurial.   The  CED  measured   the  number  of                                                              
employer  businesses  per  1,000  residents.  It  discovered  that                                                              
Skagway  had the most  businesses  per capita  in Alaska with  100                                                              
firms per  1,000 residents.  This is  due to  an influx  of nearly                                                              
one million  summer visitors, primarily  via the  cruise industry.                                                              
The  statewide  average is  25  businesses  per capita,  which  is                                                              
fairly close  to the national average.  He pointed out  an area in                                                              
the Denali  Borough has a small  population and a large  number of                                                              
seasonal visitors.  The visitor industry  is a major  stimulus for                                                              
entrepreneurship,  he  said. Western  and  Arctic  Alaska tend  to                                                              
have fewer  firms; for example,  Kusilvak has 5 firms  per capita,                                                              
which is very low.                                                                                                              
1:47:31 PM                                                                                                                    
SENATOR COSTELLO said  she was curious about the  average cost for                                                              
startups and the source of their initial capital.                                                                               
MR.  KLOUDA  recalled  seeing  some   data  that  breaks  it  into                                                              
categories.  He said  that about  two-thirds  of businesses  start                                                              
with personal and family savings.                                                                                               
1:48:49 PM                                                                                                                    
SENATOR  GRAY-JACKSON referred  to Anchorage's  "49th State  Angel                                                              
Fund," and asked how many businesses have benefitted from it.                                                                   
MR. KLOUDA  said he was  unsure. He said  the next portion  of his                                                              
presentation will  cover "Women  and Entrepreneurship  in Alaska,"                                                              
and he will provide  some figures. In response  to Chair Reinbold,                                                              
he  offered  to   provide  a  contact  and  the   publication.  He                                                              
summarized  that slide 9  shows the  urban-rural divide,  with the                                                              
caveat  that  some  rural  areas  have  a  high-volume  influx  of                                                              
seasonal visitors due to fishing.                                                                                               
1:50:29 PM                                                                                                                    
MR. KLOUDA turned  to slide 10, "More startup jobs  are created in                                                              
cities." He  reported on startup  jobs produced in  three regions:                                                              
Anchorage/Mat-Su   combined  with  5.3   jobs  per   startup,  the                                                              
Fairbanks North  Star Borough  (FNSB) with  4.8 jobs per  startup,                                                              
and  non-metro Alaska  with  3.2 jobs  per  startup. Companies  in                                                              
urban areas hire  more people than those in rural  areas, he said.                                                              
This mirrors  the national trend,  with large urban  areas growing                                                              
much  faster  than rural  ones.  It  also  supports the  trend  of                                                              
increased success for businesses in urban areas, he said.                                                                       
1:51:58 PM                                                                                                                    
MR. KLOUDA turned  to slide 11, "How does Alaska  compare to other                                                              
states?"  He  stated  that the  Kauffman  Foundation  performs  an                                                              
index  of entrepreneurship  by  state. Of  the  50 states,  Alaska                                                              
ranks  in  the top  two  or  three  for the  propensity  to  start                                                              
businesses.  However,   in  terms  of  the  tendency   to  grow  a                                                              
business,  Alaska ranks  44th, near  the bottom  of the list.  The                                                              
Kauffman  Foundation measures  businesses  with  50 employees  for                                                              
this ranking, he added.                                                                                                         
1:53:22 PM                                                                                                                    
SENATOR  BISHOP said  it would  be  interesting to  tease out  the                                                              
numbers on  "Alaska's Achille's  heel," or  its economy  of scale,                                                              
based  on its  population.  He expressed  an  interest in  whether                                                              
startups  in business  after five  years  fall in  high-population                                                              
areas of the state.                                                                                                             
MR. KLOUDA  agreed with the  scale issue  in Alaska since  it only                                                              
has 740,000 people,  which is a small market  for many businesses.                                                              
Some businesses exhaust  the market in Alaska and  eventually move                                                              
out  of state  to  reach larger  markets.  Senator Bishop's  point                                                              
about population  density and success  is also probably  valid. He                                                              
has sometimes  heard that  Alaskans lack strong  entrepreneurship.                                                              
However,  he  disagreed  since  his data  shows  the  tendency  of                                                              
people in Alaska starting businesses is very high.                                                                              
1:55:07 PM                                                                                                                    
MR.  KLOUDA  turned to  slide  12,  "Demographics." He  said  that                                                              
business  owners  are less  likely  to  be  members of  an  ethnic                                                              
minority  group, are  more likely  to be  male, and  tend to  have                                                              
significant  personal savings. He  said that  wage gaps  for women                                                              
and  minorities   tend  to  contribute   to  a  gap   in  business                                                              
ownership.  He  said  additional  research could  still  be  done.                                                              
Surprisingly,   there   is   the    perception   of   young   tech                                                              
entrepreneurs. However,  the average age for entrepreneurs  is 40.                                                              
He reported that  the Massachusetts Institute of  Technology (MIT)                                                              
did  a  study  on the  fastest  growing  companies  that  received                                                              
venture  capital. The  study showed  the average  age for  company                                                              
founders is  44, that half of  Alaska's business owners  are 55 or                                                              
older, and many  are over 65. Only six percent  of business owners                                                              
are under the age of 35, he said.                                                                                               
1:57:31 PM                                                                                                                    
MR.  KLOUDA  turned  to  slide  13, to  the  second  part  of  the                                                              
PowerPoint, titled "Women and Entrepreneurship in Alaska."                                                                      
MR.  KLOUDA turned  to slide  14, "Business  Ownership &  Gender,"                                                              
and  stated  that Alaska  has  the  highest share  of  women-owned                                                              
businesses  in the nation.  Still, the  research showed  there are                                                              
two male-owned businesses  for every female-owned  business in the                                                              
state,  or a  2-1 gap,  with  an equal  share  of men/women  owned                                                              
businesses.  However, at  the national  level the  gap is  3-1. He                                                              
said the  wage-earning gap may  contribute to women's'  ability to                                                              
leverage savings.  He concluded that investment is  heavily skewed                                                              
against female entrepreneurs.                                                                                                   
1:59:06 PM                                                                                                                    
MR. KLOUDA  turned to slide  15, and related  that only  about 2.2                                                              
percent of  the investment capital in  the country goes  to a firm                                                              
owned by  women. He recalled  a study done  by Forbes  that showed                                                            
businesses founded  by women tend to get better  operating results                                                              
and produce higher returns despite the gap.                                                                                     
1:59:46 PM                                                                                                                    
CHAIR REINBOLD  asked for the reason  for the low  venture capital                                                              
rates for women-owned businesses.                                                                                               
MR.  KLOUDA  responded  that  it  seems  to point  to  a  bias  by                                                              
investors  who  posed  questions   during  "pitch  sessions"  that                                                              
seemed to be  different than ones posed to male  entrepreneurs. He                                                              
suggested that investors are more skeptical of women founders.                                                                  
2:00:40 PM                                                                                                                    
SENATOR  BISHOP asked  for further  clarification on  the rate  of                                                              
return and operating results for male-owned firms.                                                                              
MR.  KLOUDA   offered  to  double   check  the  figures,   but  he                                                              
reiterated  that  female  entrepreneurs  generated  a  41  percent                                                              
higher  return  on equity  and  had  58 percent  better  operating                                                              
results than male entrepreneurs.                                                                                                
SENATOR BISHOP  said that if he  was loaning money, it  would be a                                                              
slam-dunk for him.                                                                                                              
CHAIR REINBOLD agreed.                                                                                                          
MR.  KLOUDA  stated that  Senator  Gray-Jackson  previously  asked                                                              
about  the 49th  State Angel  Fund. He  did not  recall the  exact                                                              
breakdown, but he  reported that the investment  dollars were much                                                              
higher for investment in women-owned businesses.                                                                                
2:01:49 PM                                                                                                                    
SENATOR  GRAY-JACKSON  directed  attention  to pages  13-14  of  a                                                              
handout  in  members'  packets   "Women  and  Entrepreneurship  in                                                              
Alaska for information about the 49th State Angel Fund.                                                                         
2:02:21 PM                                                                                                                    
MR.  KLOUDA said  that  women of  an  ethnic  minority group  only                                                              
receive two-tenths  of one  percent of  venture capital,  which is                                                              
an even greater gap, that warrants further attention.                                                                           
2:02:53 PM                                                                                                                    
MR. KLOUDA turned  to slide 16, "Business Ownership  & Ethnicity."                                                              
He reported  that 89  percent of  Alaskan business  owners  are of                                                              
European  descent, but  they only  represent about  66 percent  of                                                              
the  population. He  pointed  out  the bar  graph  that shows  the                                                              
disproportionate ethnic ownership.                                                                                              
2:03:29 PM                                                                                                                    
SENATOR BISHOP  expressed interest  in seeing  this slide  with an                                                              
overlay  of  the state's  demographics.  He  said it  appeared  to                                                              
represent the trend in Alaska based on population.                                                                              
MR.  KLOUDA answered  that  this compares  the  share of  business                                                              
owners to  the share  of population,  so it  does tend  to overlay                                                              
business ownership  with the  general population. He  acknowledged                                                              
the  non-minorities  represent  a larger  percentage  of  business                                                              
owners than the general population.                                                                                             
SENATOR  BISHOP  stated  that  Alaska   Natives  are  the  fastest                                                              
growing population in the state.                                                                                                
MR. KLOUDA said  Alaska Natives represent about 20  percent of the                                                              
population,  but  they  have  a much  smaller  share  of  business                                                              
owners.  He  said that  this  data  examines businesses  owned  by                                                              
individuals,  or a small  number of individuals,  but it  does not                                                              
include  shareholder-owned  corporations.   He  said  that  Alaska                                                              
Native Corporations  are major players in the  state's economy. He                                                              
offered  his  belief  that some  entrepreneurship  in  the  Alaska                                                              
Native   community  is   likely  expressed   through  the   Native                                                              
corporations, although it still points to an overall gap.                                                                       
2:05:22 PM                                                                                                                    
MR. KLOUDA turned  to slide 17 and shifted to  the "CED's Emerging                                                              
Sector Series"  portion of his PowerPoint.  He said that  the CED,                                                              
in  partnership   with  Department  of  Commerce,   Community  and                                                              
Economic    Development    (DCCED),   identified    clusters    of                                                              
entrepreneurial  interest. The  CED focused  on entrepreneurs  who                                                              
work  in  areas  that  are  not   necessarily  getting  a  lot  of                                                              
attention but are ones tied to an area of expertise in Alaska.                                                                  
The  CED identified  some sectors  that Alaska  has expertise  in,                                                              
including  aviation  and aerospace,  outdoor  products,  renewable                                                              
energy,  boat and  ship  building, and  food  and agriculture.  He                                                              
said the  agency interviewed  entrepreneurs  to learn about  their                                                              
markets,  and the  reasons that  Alaska  makes sense  for them  to                                                              
operate  in  Alaska.  The  CED worked  to  identify  their  needs,                                                              
challenges, and opportunities.                                                                                                  
2:07:02 PM                                                                                                                    
MR.  KLOUDA turned  to slide  18, to  a photograph  of a  Sikorsky                                                              
helicopter  flown  by the  Austrian  Armed  Forces in  Europe.  He                                                              
directed  attention to  the  skis on  the  helicopter. Those  skis                                                              
were built in Anchorage  by a company, Air Glas,  in a little shop                                                              
off  of O'Malley  Road. Air  Glas  makes carbon  fiber skis,  fuel                                                              
pods,  storage containers  and  other  fixtures for  aircraft  and                                                              
sells  them to  civil  aviation companies  and  about 40  overseas                                                              
military  organizations.  He said  Air  Glas  is a  global  leader                                                              
filling  a   specialty  niche,  but   it  operates  in   a  small,                                                              
unpretentious shop in Anchorage.                                                                                                
2:08:05 PM                                                                                                                    
SENATOR BIRCH said  Air Glas is in his district.  He commended the                                                              
product and scale  of this phenomenal business.  He has personally                                                              
seen their products  at JBER (Joint Base Elmendorf-Richardson)  in                                                              
2:08:33 PM                                                                                                                    
SENATOR  COSTELLO  asked whether  Mr.  Klouda could  provide  more                                                              
details on the company.                                                                                                         
MR.  KLOUDA said  Air  Glas was  started by  a  WWII aviator,  Wes                                                              
Landus, who  began his business  by doing basic Fiberglas  work in                                                              
the 50s.  The original  owner sold  the business  and the  new one                                                              
expanded  into a  model using  carbon  fiber high-tech  materials.                                                              
The  business  continues  to  serve an  Alaskan  market  of  civil                                                              
aviators as well  as an international market. He  said that Alaska                                                              
has more aircraft than states like New York and Illinois.                                                                       
He  said  that  Alaska  also  has a  deep  well  of  knowledge  in                                                              
aviation  that  spurs entrepreneurship  and  companies  like  this                                                              
one.  However, Air  Glas is  not  a unique  company, that  several                                                              
others make  metal fabrication  for specific aircraft  components.                                                              
He  said they  are usually  small, very  high-value products  that                                                              
are  sold to  global  markets. He  said that  Aero  Twin, Inc.  is                                                              
located at  Merrill Field and sells  its products to  companies in                                                              
sub-Saharan Africa  and China. Aero  Twin developed,  created, and                                                              
submitted  its products  to  the Federal  Aviation  Administration                                                              
(FAA) for approval.  This gives them an exclusive  right to create                                                              
the  product,  he  said.  Airframes   Alaska  is  another  company                                                              
located in  Birchwood, he said.  Alaska is a pioneer  in aviation,                                                              
including  developing and  testing airplane  floats and skis.  The                                                              
Automatic  Dependent Surveillancebroadcast   (ADSB)   system is  a                                                              
surveillance  technology  in  which  an  aircraft  determines  its                                                              
position  via   satellite  navigation.   This  technology   allows                                                              
tracking aircraft is  now a global standard, but  it was developed                                                              
and  tested in  Alaska. Some  of  the first  non-military uses  of                                                              
unmanned  aircraft   were  developed  and  tested   in  Alaska  in                                                              
conjunction with the University of Alaska Fairbanks.                                                                            
2:11:39 PM                                                                                                                    
CHAIR  REINBOLD said  Birchwood is  in her  district. She  pointed                                                              
out that Aircraft  Wing Covers is a female-owned  business located                                                              
in Eagle River.  It makes covers for arctic insulated  cowling and                                                              
wings, she said.                                                                                                                
2:12:47 PM                                                                                                                    
MR.  KLOUDA  turned  to slide  19,  "9:ZERO:7."  Alaska  has  also                                                              
developed  outdoor gear,  which is  another area  of expertise  in                                                              
Alaska. This  Alaska company, "9:ZERO:7,  claims to  have invented                                                              
the fat-tire bike.  It was started by two Alaskans  and was one of                                                              
the  early companies  to  commercially  produce a  fat-tire  bike.                                                              
Thee bikes are designed  and based in Alaska and  are a recognized                                                              
brand. Even though  they are not manufactured in  Alaska, they are                                                              
based  here and  sell  nationally.  He pointed  out  the bike  bag                                                              
shown  on the  slide is  made by  Revelate Designs,  LLC, also  an                                                              
Alaskan-based   company.  He   related  that   Alpacka  Raft   was                                                              
originally  based in  Alaska. That  company  initiated the  modern                                                              
pursuit of packrafting, he said.                                                                                                
He said  that Alaskans  also know a  lot about "playing  outside."                                                              
All of the  businesses who sell  their products out of  state brag                                                              
about  their Alaska  heritage.  9:Zero:7  advertises "Designed  in                                                              
Alaska for  All Conditions."  Heather's Choice  is a company  that                                                              
makes  pre-packaged,  freeze-dried   gourmet  meals  designed  for                                                              
backpacking.  These   meals  are  being  distributed   around  the                                                              
country,  he said.  The company  was started  by Heather Kelly,  a                                                              
young   Alaskan  woman   who   has  leveraged   Alaska's   outdoor                                                              
expertise.  Nationally,  significant   venture  capital  is  going                                                              
toward outdoor products,  so it is an area with  growth potential,                                                              
he said.                                                                                                                        
CHAIR REINBOLD  remarked that Bambinos  is another  Alaska company                                                              
markets baby  food internationally  and showcases Alaska's  salmon                                                              
and seafood.                                                                                                                    
2:15:47 PM                                                                                                                    
MR. KLOUDA  remarked that  the Alaska  "brand" takes advantage  of                                                              
the perception  that Alaska has  a pure and pristine  environment,                                                              
especially as it relates to its fish and seafood.                                                                               
2:16:16 PM                                                                                                                    
MR.  KLOUDA  turned  to  slide   20,  "Applying  Innovation  to  a                                                              
Traditional  Industry."   Boats  and  shipbuilding   represent  an                                                              
important footprint  in Southeast Alaska. He said  boatbuilding is                                                              
an old industry  that has not changed  much. In fact,  boats are a                                                              
way of  life for  personal, commercial,  and subsistence  uses. He                                                              
directed attention to the left side of the slide, to the high-                                                                  
density plastic being  cut that will be welded into  a boat. Class                                                              
5  Boatworks,  LLC   is  a  spinoff  company  in   Fairbanks  that                                                              
developed  a very  tough plastic.  The  plastic is  used in  high-                                                              
speed river  boats since  it can  withstand rugged conditions  and                                                              
not  damage the  boat. The  company demonstrates  how tough  their                                                              
product  is by  encouraging  people  at boat  shows  to hit  their                                                              
boats using  a sledgehammer. A  Wasilla company, [MMT  Inc.} makes                                                              
AlumaSki boats. Their  product is an aluminum jet ski  boat with a                                                              
very  shallow draft  that  allows people  to  travel very  quickly                                                              
through  glacial   streams.  Although  the  boat   was  originally                                                              
marketed for  recreational use,  the company  found its  market in                                                              
search and  rescue. These boats  can be  used in Upper  Cook Inlet                                                              
to rescue people caught in low tidal situations, he said.                                                                       
2:18:41 PM                                                                                                                    
MR. KLOUDA turned to slide 21, "Emerging  Sector Sprint: VOLT49."                                                               
He said  the Center  for Economic  Development (CED) did  reported                                                              
on  renewable energy  and energy  efficiency. The  purpose of  the                                                              
research is to find  insights and new knowledge that  can be used.                                                              
In terms  of the  renewable energy  sector, this  sector tends  to                                                              
provide  more  services  and consulting  but  less  products.  For                                                              
example,  Arctic Solar  Ventures installs  rooftop solar  systems.                                                              
The CED  has discovered  that the public  sector can  help connect                                                              
entrepreneurs  to other  entrepreneurs,  connect entrepreneurs  to                                                              
sources  of  capital, or  connect  them  to student  interns.  The                                                              
network  support structure  for  entrepreneurs has  shown to  make                                                              
them more successful.                                                                                                           
2:19:51 PM                                                                                                                    
SENATOR BISHOP  asked if the  CED assists these  entrepreneurs and                                                              
if he is aware  of the assets available for new  business startups                                                              
via the Department of Labor and Workforce Development (DOLWD).                                                                  
MR. KLOUDA  answered yes. He  said he is  familiar with  the DOLWD                                                              
workforce  funds  and apprenticeship  programs  and  the CED  uses                                                              
these resources.  He remarked that it seems like  larger employers                                                              
are more  aware of  the programs,  even though smaller  businesses                                                              
and startups  often have  unmet needs. He  pointed out  that firms                                                              
often look  to the CED  to find interns since  the CED is  part of                                                              
the university.                                                                                                                 
2:20:56 PM                                                                                                                    
MR.  KLOUDA  returned  to  slide   21,  "Emerging  Sector  Sprint:                                                              
VOLT49."  He  said  the  photograph  on  this  slide  demonstrates                                                              
something Google  has popularized. [Volt 49 is  a renewable energy                                                              
sprint  based on  the Google  Ventures' Sprint  process. A  sprint                                                              
gives  innovators  new skills  to  jump start  potential  business                                                              
ideas and  quickly realize  when an  idea is  doomed to  fail.] He                                                              
explained  that  Google assembles  teams  and challenges  them  to                                                              
create  a new product  in a  compressed timeframe.  In five  days,                                                              
the   teams  create   a  prototype.   The   Center  for   Economic                                                              
Development  (CED) decided  to try  this  approach with  renewable                                                              
energy. The  CED recruited teams  for the Volt 49  sprint project.                                                              
These teams  met five  times over  the course  of a month.  During                                                              
this  time the  CED  taught the  teams entrepreneurial  tools  and                                                              
processes related  to innovation,  including how  to come  up with                                                              
an idea,  assess a  customer need, and  develop a rough  prototype                                                              
that could  be refined. The winning  team developed a  server that                                                              
can  be powered  by a  renewable wind  or solar  power system.  He                                                              
characterized it  as hands-on training  for entrepreneurs  that is                                                              
effective. The  CED has taken this  training program to  the UAA's                                                              
student  population. This  is a  program  that UAA  would like  to                                                              
continue, he said.                                                                                                              
2:22:24 PM                                                                                                                    
MR. KLOUDA turned  to Slide 22, "Other Observations."  He directed                                                              
attention to  the photograph of  a backpack made by  "Fishe Wear."                                                              
He said that  Linda Leary launched Fishe Wear,  using her colorful                                                              
designs  to create  fishing  attire  for women.  He  said the  CED                                                              
wants  entrepreneurs  to  lead  the way  with  the  CED  providing                                                              
support for  them. Businesses  that are  successful are  ones that                                                              
find a niche or underserved market.                                                                                             
He said  that significant  research and  development (R&D),  is an                                                              
area where entrepreneurs  create products, but capital  access can                                                              
create  challenges.   Aviation  businesses  need  to   create  new                                                              
projects  to  sustain growth.  Many  businesses  have  significant                                                              
upfront expenses  an must  absorb costs  until their products  are                                                              
marketed.  These   businesses  have   expressed  an   interest  in                                                              
obtaining  R&D tax  relief, such  as  an incentive  or credit  for                                                              
state corporate income taxes.                                                                                                   
MR. KLOUDA  said that all of the  sectors and the majority  of the                                                              
businesses  identified  major  workforce   gaps.  It  might  be  a                                                              
shortage  of skilled  people  to  fill a  specialty  area or  soft                                                              
skills. The  business community has  a small workforce and  is one                                                              
that presents challenges.  The CED works to  connect entrepreneurs                                                              
to  workforce resources.  He  noted  that he  interviewed  someone                                                              
from a  small company  who holds  a master's  degree in  aerospace                                                              
engineering  from  MIT and  designs  products in  Anchorage.  This                                                              
speaks to  the level of talent  in the entrepreneurial  field that                                                              
is attracted to Alaska.                                                                                                         
2:26:32 PM                                                                                                                    
SENATOR BISHOP  thanked Senator  Costello for  her work  last year                                                              
in  holding innovation  roundtables  on  the economy.  He  thanked                                                              
Chair Reinbold for today's presenter.                                                                                           
CHAIR REINBOLD thanked her staff.                                                                                               
2:27:21 PM                                                                                                                    
SENATOR  COSTELLO   said  that   having  Mr.  Klouda   before  the                                                              
committee  is  important.  She   related  her  understanding  that                                                              
innovation   drives  the   economy   and   Alaskans  are   natural                                                              
innovators.  She said she  hopes that  the equity crowd  investing                                                              
and  Internal  Revenue  Code  (IRC)  Section  1202  C  corporation                                                              
legislation  that  passed  will  also  be  helpful  to  businesses                                                              
looking  for equity.  She  said  it was  nice  to  hear about  the                                                              
entrepreneurs, especially the women entrepreneurs in Alaska.                                                                    
^CONFIRMATION HEARING(S):                                                                                                       
                    CONFIRMATION HEARING(S):                                                                                
                    Marijuana Control Board                                                                                 
                Alcoholic Beverage Control Board                                                                            
2:29:15 PM                                                                                                                    
CHAIR REINBOLD  announced that  the next  order of business  would                                                              
be confirmation  hearings for Christopher Jaime,  appointee to the                                                              
Marijuana  Control  Board  and Charlie  Cross,  appointee  to  the                                                              
Alcoholic Beverage Control Board.                                                                                               
2:29:31 PM                                                                                                                    
CHRISTOPHER JAIME,  appointee, Marijuana Control  Board, Soldotna,                                                              
Alaska,  Division  of  Corporations,   Business  and  Professional                                                              
Licensing,   Department  of  Commerce,   Community  and   Economic                                                              
Development (DCCED),  stated that he works as a  lieutenant in the                                                              
Division  of  Alaska  Wildlife   Troopers,  Department  of  Public                                                              
Safety. He  has lived  in Alaska  for 26 years  and has  been with                                                              
the department for 18 years.                                                                                                    
2:30:31 PM                                                                                                                    
MR.  JAIME stated  that during  his career  he has  worked in  the                                                              
Division of  Alaska Wildlife  Troopers or  the Division  of Alaska                                                              
State  Troopers   in  Anchorage,   Sitka,  Fairbanks,   Nome,  and                                                              
Soldotna.  He has  had a  diverse  career with  the Department  of                                                              
Public Safety  (DPS). He has worked  in urban  and  rural settings                                                              
to enforce  wildlife statutes  and regulations throughout  Alaska.                                                              
He said  he will bring  his perspective  to the Marijuana  Control                                                              
Board.  He  related  his  understanding  that  Alaskans  voted  to                                                              
legalize  the   consumption,  cultivation,  and   distribution  of                                                              
marijuana. He  said his focus  is not to  voice his  personal view                                                              
of marijuana  or to go  against the will  of the people.  Instead,                                                              
he  would  like  to take  a  common-sense  approach  and  regulate                                                              
marijuana from  a public safety  perspective. He said he  would be                                                              
receptive  to   the  marijuana   industry  needs  yet   weigh  all                                                              
decisions  through the  lens of  law enforcement.  He has  already                                                              
been contacted  by a  local marijuana  cultivator who  briefed him                                                              
on the  business and  the challenges  the industry  faces.  He has                                                              
also  had an  opportunity to  speak with  the owner  of High  Bush                                                              
Buds, a marijuana  dispensary, who explained the  retail marijuana                                                              
business.  He   has  not  been   given  any  direction   from  the                                                              
administration on  his appointment. He offered his  belief that he                                                              
was selected  to serve  because of  his training, experience,  and                                                              
service to the state.                                                                                                           
2:32:27 PM                                                                                                                    
CHAIR REINBOLD  remarked that his  resume is impressive.  She said                                                              
she was  pleased to have  someone of his  caliber fill  the public                                                              
safety seat on the Marijuana Control Board.                                                                                     
2:33:18 PM                                                                                                                    
CHARLIE  CROSS,  Appointee,  Alcoholic   Beverage  Control  Board,                                                              
Division  of Corporations,  Business  and Professional  Licensing,                                                              
Department  of   Commerce,  Community  and   Economic  Development                                                              
(DCCED), stated  he is a lifelong  Alaskan who has lived  in Nome,                                                              
Elim,  and Kotzebue.  He  attended high  school  in Anchorage  and                                                              
studied criminal  justice at the  University of Alaska  Fairbanks.                                                              
He lived  in Albuquerque, New Mexico,  married, and moved  back to                                                              
Alaska to pursue  a career with the Alaska State  Troopers and was                                                              
stationed  in  Fairbanks and  Kodiak.  He  has  also served  as  a                                                              
wildlife  trooper and  as an  investigator on  the Western  Alaska                                                              
Alcohol  and Narcotics  team for  the  Statewide Drug  Enforcement                                                              
Unit.   He  has   conducted  investigations   for  alcohol,   drug                                                              
interdiction  and  postal  inspector to  address  illegal  alcohol                                                              
issues  in  Western  Alaska.  He   was  in  charge  of  the  Major                                                              
Offenders  Unit,  working  directly   with  the  Drug  Enforcement                                                              
Administration  (DEA), and  the  Federal Bureau  of  Investigation                                                              
(FBI). He  moved to Nome  in 2012 and was  in charge of  the post.                                                              
He  said his  passion and  interest  lies in  Western Alaska.  His                                                              
particular focus is on how alcohol is treated.                                                                                  
2:36:12 PM                                                                                                                    
MR. CROSS  noted that he is  personal friends with Mr.  Rex Leath,                                                              
who  currently serves  on  the ABC  Board.  He  remarked that  his                                                              
grandfather John Cross,  was from Kansas but World  War II brought                                                              
him to  Kotzebue, where  he was an  aviator and entrepreneur.  His                                                              
grandfather   later   served  as   a   delegate   to  the   Alaska                                                              
Constitutional Convention.                                                                                                      
He  said he  is pleased  and  honored to  serve  on the  Alcoholic                                                              
Beverage  Control  Board  to  make   Alaska  better  in  terms  of                                                              
decisions related to alcoholic beverages.                                                                                       
2:37:50 PM                                                                                                                    
SENATOR BIRCH  reviewed the MCB  composition, with  voting members                                                              
from public safety,  public health, one residing in  a rural area,                                                              
and two actively engaged in marijuana industry.                                                                                 
He asked whether Mr. Cross would serve on the rural seat.                                                                       
MR. CROSS  agreed he  was appointed  to serve  in the rural  seat,                                                              
since he retired from the Alaska State Troopers on October 1.                                                                   
SENATOR  BIRCH,  after reviewing  the  function of  the  Marijuana                                                              
Control Board,  shared his views  on marijuana. He said  he served                                                              
as co-chair  of an  organization  that was opposed  to the  ballot                                                              
initiative for legalization of marijuana.                                                                                       
SENATOR  BIRCH  acknowledged  that  he  referenced  the  Marijuana                                                              
Control  Board and  not  the  Alcoholic Beverage  Control's  Board                                                              
(ABC  Board) composition  and  function.  He recognized  that  Mr.                                                              
Cross is seeking confirmation to the ABC Board.                                                                                 
He asked  for further clarification  that Mr. Cross is  serving in                                                              
the rural position.                                                                                                             
MR. CROSS answered yes.                                                                                                         
2:39:48 PM                                                                                                                    
SENATOR BISHOP said  he was interested to see that  Mr. Cross is a                                                              
financial  coach  and  he  obtained his  training  from  the  Dave                                                              
Ramsey Group.                                                                                                                   
MR. CROSS answered yes.                                                                                                         
2:40:03 PM                                                                                                                    
SENATOR BISHOP  remarked that  he is  glad to  see that  he spends                                                              
time at the Nome facility to work with inmates.                                                                                 
MR.  CROSS responded  that  he has  taught  classes  at the  Anvil                                                              
Mountain Correctional Center.                                                                                                   
2:40:35 PM                                                                                                                    
CHAIR REINBOLD  opened public  testimony the confirmation  hearing                                                              
for Christopher  Jaime, appointee  to the  MCB and Charlie  Cross,                                                              
appointee to the ABC Board.                                                                                                     
2:41:07 PM                                                                                                                    
CHELSEA  FOSTER, representing  self, said  she would  like to  add                                                              
that  Jeff  Ankerfelt  was  a  great  addition  to  the  Marijuana                                                              
Control Board and  she is sad to see him go.  She personally would                                                              
like to  see Paul  Honeman in the  seat. She  said that  she hopes                                                              
[Christopher Jaime],  if confirmed, will work with  great tenacity                                                              
and  diligence,  with  an  open  mind  when  it  comes  to  making                                                              
decisions  for this  industry.  As  previously testified  to,  the                                                              
cannabis  industry  has  added  jobs  and  value  to  the  state's                                                              
economy.  She thanked  the  committee, especially  Senator  Birch,                                                              
for the committee's thorough evaluations of the appointees.                                                                     
2:42:03 PM                                                                                                                    
CALEB  SAUNDERS,  Owner;  Chief   Executive  Officer,  Green  Jar,                                                              
thanked  Christopher  Jaime  for  his  public  Safety  service  in                                                              
communities  in   Alaska.  He  appreciated  that   Mr.  Jaime  has                                                              
acquired so much  experience for the seat. He welcomed  him to the                                                              
MCB, if confirmed.                                                                                                              
2:43:05 PM                                                                                                                    
CHAIR  REINBOLD  closed  public testimony,  then  reopened  public                                                              
testimony  for the  confirmation  hearing  for Christopher  Jaime,                                                              
appointee to the Marijuana Control Board.                                                                                       
2:43:33 PM                                                                                                                    
RYAN TUNSETH,  Owner, East-Rip,  offered his support  of appointee                                                              
Christopher  Jaime to  the  Marijuana Control  Board.  He said  he                                                              
owns a retail  marijuana store in Kenai. He acknowledged  that Mr.                                                              
Jaime  has reached  out  to local  marijuana  businesses and  they                                                              
informally  related that  their discussions  were meaningful,  and                                                              
that Mr.  Jaime was  willing to understand  the inner  workings of                                                              
the marijuana  industry. He also  received recommendations  from a                                                              
friend.  He asked  his  friend, who  is a  trooper,  if Mr.  Jaime                                                              
could be impartial  and his friend answered, "You know  we take an                                                              
oath for that."                                                                                                                 
He  said  he wanted  to  offer  his support  to  demonstrate  that                                                              
marijuana businesses  are not against every appointee.  He offered                                                              
his  belief that  Mr. Jaime  is qualified  for the  seat and  will                                                              
bring  a sensible  voice to  the board.  He said  he deserves  the                                                              
benefit of  the doubt  that he will  make impartial  decisions. He                                                              
echoed  what  Caleb Saunders  said  because  he knows  that  board                                                              
meetings  are  time  consuming.  He  appreciated  the  committee's                                                              
questions to candidates on whether they can be impartial.                                                                       
2:45:33 PM                                                                                                                    
CHAIR  REINBOLD,   after  first  determining  no   one  wished  to                                                              
testify, closed  public testimony on the confirmation  hearing for                                                              
Christopher  Jaime  to the  Marijuana  Control Board  and  Charlie                                                              
Cross, to the Alcoholic Beverage Control Board.                                                                                 
2:45:51 PM                                                                                                                    
CHAIR REINBOLD clarified  that Christopher Jaime  is the appointee                                                              
to  the  Marijuana   Control  Board  and  Charlie   Cross  is  the                                                              
appointee for  the rural  seat of  the Alcoholic Beverage  Control                                                              
2:46:36 PM                                                                                                                    
CHAIR REINBOLD  stated that in  accordance with AS  39.05.080, the                                                              
Senate  Labor   and  Commerce  Standing  Committee   reviewed  the                                                              
following  and  recommends  the  appointments be  forwarded  to  a                                                              
joint session for consideration:                                                                                                
Marijuana Control Board                                                                                                       
Christopher Jaime - Soldotna                                                                                                    
Alcoholic Beverage Control Board                                                                                              
Charlie Cross - Nome                                                                                                            
[Signing  the   reports  regarding  appointments  to   boards  and                                                              
commissions  in no way  reflects individual  members' approval  or                                                              
disapproval  of   the  appointees;  the  nominations   are  merely                                                              
forwarded   to   the  full   legislature   for   confirmation   or                                                              
2:47:05 PM                                                                                                                    
CHAIR REINBOLD reviewed upcoming committee announcements.                                                                       
2:48:04 PM                                                                                                                    
There  being no  further business  to come  before the  committee,                                                              
Chair Reinbold  adjourned the Senate  Labor and Commerce  Standing                                                              
Committee meeting at 2:48 p.m.                                                                                                  

Document Name Date/Time Subjects
Women and Entrepreneurship in Alaska - UAA Center for Economic Development - Nov. 2018.pdf SL&C 2/14/2019 1:30:00 PM