Legislature(2017 - 2018)BELTZ 105 (TSBldg)

01/26/2017 01:30 PM LABOR & COMMERCE

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Audio Topic
01:31:40 PM Start
01:32:19 PM Strategy for Alaska's Economy
01:34:58 PM Anchorage Economic Development Corporation
02:00:52 PM Kenai Peninsula Economic Development District
02:13:52 PM Southeast Conference
02:55:09 PM Department of Commerce, Community and Economic Development
03:27:35 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ STRATEGY FOR ALASKA'S ECONOMY TELECONFERENCED
Alaska Regional Development Organizations
Anchorage Economic Development Corporation
Fairbanks Economic Development Corporation
Southeast Conference
Department of Commerce, Community, & Economic
Development
Presentation: Northern Opportunity: Alaska's
Economic Strategy
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                        January 26, 2017                                                                                        
                           1:31 p.m.                                                                                            
                                                                                                                                
                                                                                                                              
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Mia Costello, Chair                                                                                                     
Senator Shelley Hughes, Vice Chair                                                                                              
Senator Kevin Meyer                                                                                                             
Senator Berta Gardner                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Gary Stevens                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
STRATEGY FOR ALASKA'S ECONOMY                                                                                                   
                                                                                                                                
     Alaska Regional Development Organizations                                                                                  
     Department of Commerce, Community and Economic Development                                                                 
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record.                                                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
BILL POPP, President & CEO                                                                                                      
Anchorage Economic Development Corporation (AEDC)                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Presented information on the Anchorage                                                                    
Economic Development Corporation regional development plan.                                                                     
                                                                                                                                
TIM DILLON, Executive Director                                                                                                  
Kenai Peninsula Economic Development District (KPEDD)                                                                           
Kenai, Alaska                                                                                                                   
POSITION STATEMENT: Provided information on the Kenai Peninsula                                                               
Economic Development District economic development plan.                                                                        
                                                                                                                                
SHELLY WRIGHT, Executive Director                                                                                               
Southeast Conference                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:   Presented    information   on   Southeast                                                             
Conference's role in economic development.                                                                                      
                                                                                                                                
MEILANI SCHIJVENS, Economic Planner                                                                                             
Rain Coast Data;                                                                                                                
Member                                                                                                                          
Southeast Conference                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:  Presented   information  on  the  Southeast                                                             
Conference economic development plan.                                                                                           
                                                                                                                                
ROBERT VENEBLES, Energy Coordinator                                                                                             
Southeast Conference                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:  Presented   information  on  the  Southeast                                                             
Conference energy goals.                                                                                                        
                                                                                                                                
CHRIS HLADICK, Commissioner                                                                                                     
Department of Commerce, Community and Economic Development                                                                      
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:  Participated  in  the  presentation  titled                                                             
"Northern   Opportunity,"   Alaska's  Comprehensive   Development                                                               
Strategy.                                                                                                                       
                                                                                                                                
BRITTENY CIONI-HAYWOOD, Director                                                                                                
Division of Economic Development                                                                                                
Department of Commerce, Community and Economic Development                                                                      
POSITION  STATEMENT:  Participated  in  the  presentation  titled                                                             
"Northern   Opportunity,"   Alaska's  Comprehensive   Development                                                               
Strategy.                                                                                                                       
                                                                                                                                
ETHAN TYLER, Manager                                                                                                            
Division of Economic Development                                                                                                
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:  Participated  in  the  presentation  titled                                                             
"Northern   Opportunity,"   Alaska's  Comprehensive   Development                                                               
Strategy.                                                                                                                       
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                              
1:31:40 PM                                                                                                                    
CHAIR MIA COSTELLO called the  Senate Labor and Commerce Standing                                                             
Committee meeting  to order at 1:31  p.m. Present at the  call to                                                               
order were Senators Gardner, Hughes, Meyer, and Chair Costello.                                                                 
                                                                                                                                
^Strategy for Alaska's Economy                                                                                                  
                 Strategy for Alaska's Economy                                                                              
                                                                                                                              
1:32:19 PM                                                                                                                    
CHAIR COSTELLO said  the committee will continue to  focus on the                                                               
economy  by  looking  at  the  regional  development  plans.  The                                                               
question members  should consider is  if the state should  have a                                                               
strategic vision to  move forward with an eye to  a resilience in                                                               
the economy. She welcomed Bill Popp.                                                                                            
                                                                                                                                
^Anchorage Economic Development Corporation                                                                                     
1:34:58 PM                                                                                                                    
BILL  POPP,  President  &  CEO,  Anchorage  Economic  Development                                                               
Corporation (AEDC),  shared AEDC's  mission, which  is to  grow a                                                               
prosperous,  sustainable,  and  diverse  Anchorage  economy.  The                                                               
vision is for  Anchorage to be the number one  city in America in                                                               
which  to  live,  work,  and  play  by  2025.  The  focus  is  on                                                               
Anchorage,  but AEDC  believes what  is good  for others  is also                                                               
good for Anchorage.                                                                                                             
                                                                                                                                
He  stated  that the  municipality  faces  a lot  of  challenges.                                                               
                        th                                                                                                      
Anchorage is  now the 20   most expensive  city in the  nation at                                                               
130.2 percent of  the national cost-of-living average.  It is the                                                               
 ththth                                                                                                                         
6   highest for groceries, 20   for housing, 112   for utilities,                                                               
  thrd                                                                                                                          
36   highest  for transportation,  and  it  remains the  3   most                                                               
expensive city  for healthcare at  143.5 percent of  the national                                                               
                    th                                                                                                          
average. It is the 5   most expensive for miscellaneous goods and                                                               
                                      th                                                                                        
services at  125.8 percent,  and the 7most    expensive  place to                                                               
buy  a Big  Mac.  This  shows the  difficulty  of attracting  new                                                               
outside investment.                                                                                                             
                                                                                                                                
MR.  POPP related  that AEDC  offers services  to businesses  and                                                               
growth-focused programs,  such as research and  analysis reports,                                                               
national   and   international   business   attraction   methods,                                                               
assistance to  new and existing  businesses seeking to  invest in                                                               
Anchorage,   and  support   for  entrepreneurship   and  relative                                                               
programs and initiatives.                                                                                                       
                                                                                                                                
He explained that  AEDC's strategic efforts are  focused in three                                                               
key areas:  Live, Work,  Play Initiative,  Comprehensive Economic                                                               
Development  Strategy,  and   the  Airport  Business  Development                                                               
Initiative.  Live,  Work,  Play is  the  community  redevelopment                                                               
initiative  focused   on  strengthening   community  foundational                                                               
elements,  which undermine  economic  efforts if  they are  weak.                                                               
These include  safety, housing, education, arts,  recreation, and                                                               
the health and diversity of the community.                                                                                      
                                                                                                                                
He  said that  the  Comprehensive  Economic Development  strategy                                                               
takes  advantage of  the improved  community  foundations and  is                                                               
focused  on  economic  development.   The  strategy  is  set  for                                                               
completion  in the  fall of  2017.  It is  a grassroots  planning                                                               
process that will  lay down a five-year set  of initiatives, such                                                               
as downtown revitalization and a U-Med Innovation District.                                                                     
                                                                                                                                
He turned  to the Airport Business  Development Initiative, which                                                               
is entering  its fourth  year. He termed  the airport  the "crown                                                               
                                                                th                                                              
jewel" in  the state's overall economy. Last  year it was the  4                                                                
busiest  cargo airport  on  the  planet. He  said  AEDC spent  18                                                               
months  focusing on  global supply  chains as  potential business                                                               
operations  in Anchorage.  The four  that  rose to  the top  were                                                               
pharmaceuticals,    especially   clinical    trials,   automotive                                                               
electronics,   consumer   electronics,    and   aviation   parts.                                                               
Pharmaceuticals was the most likely opportunity.                                                                                
                                                                                                                                
MR.  POPP  said that  for  the  last  18  months, AEDC  has  been                                                               
focusing   on  analyzing   pharmaceutical   industry  needs   and                                                               
expectations. They  also have been  working to align  private and                                                               
public  partnerships  and looking  at  industry  cost trends.  He                                                               
predicted that  the new business  facilities would be  small with                                                               
10 to 25 employees. He noted it was a long-term project.                                                                        
                                                                                                                                
1:45:15 PM                                                                                                                    
                                              th                                                                                
MR. POPP related that AEDC is entering its  30  anniversary year.                                                               
It  is a  10-person operation  with a  65-member board.  The 2017                                                               
budget is estimated  at $1.8 million cash and  in-kind and direct                                                               
government   funding   of   about  $250,000,   fully   from   the                                                               
Municipality  of  Anchorage.  The  remainder  is  private  sector                                                               
sourced.                                                                                                                        
                                                                                                                                
He  concluded, "There  are no  easy  wins in  either economic  or                                                               
community  development." He  stressed  that  investments in  both                                                               
efforts are critical  to community development and  must go hand-                                                               
in-hand  with  economic   development  strategies.  He  suggested                                                               
thinking of it as a  private/public project, not a public/private                                                               
project.                                                                                                                        
                                                                                                                                
1:47:28 PM                                                                                                                    
CHAIR COSTELLO thanked Mr. Popp for his work.                                                                                   
                                                                                                                                
SENATOR  HUGHES asked  for the  names of  the other  three cities                                                               
that are  higher than Anchorage  for health care. She  also asked                                                               
why  pharmaceuticals rose  to the  top in  the study  of industry                                                               
possibilities for Anchorage.                                                                                                    
                                                                                                                                
MR.  POPP respond  that Fairbanks  is first,  Juneau second,  and                                                               
Kodiak is  fourth for the cost  of health care. The  next closest                                                               
city  was Boston  at 20  percent above  the national  average. He                                                               
stressed that expensive health care  is a substantial problem and                                                               
contributes  to a  lack of  competitiveness for  business in  the                                                               
state.                                                                                                                          
                                                                                                                                
He  explained that  pharmaceuticals  are a  target because  25-30                                                               
percent of the  cost of developing a drug comes  from the cost of                                                               
doing clinical trials.  Most companies are trying  to develop new                                                               
drugs for distribution around the  world, not in the U.S. market.                                                               
The  FDA requires  U.S. sourced  materials  for clinical  trials.                                                               
That puts  Alaska in an interesting  position. If pharmaceuticals                                                               
can be  based in Anchorage,  they can distribute to  major market                                                               
places  for clinical  trials in  several Asian  countries in  one                                                               
airplane ride, which is a major risk reduction.                                                                                 
                                                                                                                                
1:52:03 PM                                                                                                                    
CHAIR COSTELLO asked  him to comment on  the relationship between                                                               
Anchorage's  economy  and   the  rest  of  the   state.  All  the                                                               
economists  agree that  Alaska is  experiencing a  recession. She                                                               
referred to  a map  showing how job  growth varies,  depending on                                                               
location.                                                                                                                       
                                                                                                                                
MR.  POPP said  the relationship  is symbiotic.  If Fairbanks  is                                                               
suffering, there  is less  coming through  the Port  of Anchorage                                                               
for that destination. The same  applies throughout the state, but                                                               
to a lesser extent to Southeast  and the Aleutian chain. AEDC saw                                                               
a  "bubble"  that just  burst  -  the professional  and  business                                                               
services sector, mainly in Anchorage.  He recalled the history of                                                               
project-oriented spending.  Two-thirds, or  1,600, of  job losses                                                               
last year  were centered in  that sector. About another  900 jobs                                                               
were lost in construction.                                                                                                      
                                                                                                                                
CHAIR COSTELLO  said most of the  job losses were in  the private                                                               
sector, primarily oil  and gas and construction.  She pointed out                                                               
that job loss  varies around the state. The  legislature has been                                                               
interested in knowing how much  of the capital budget dollars are                                                               
unspent,  due  to  the  five-year time  limit.  She  provided  an                                                               
example  from  her  district.  She  suggested  that  knowing  the                                                               
balance is helpful information.                                                                                                 
                                                                                                                                
MR.  POPP relayed  that professional  and business  services lost                                                               
direct local jobs,  as well as oil and gas  sector jobs. They are                                                               
still sorting  out the losses  on the North  Slope with 25  to 30                                                               
percent  being  non-resident. He  noted  that  Anchorage is  just                                                               
starting to see  an impact to the  non-resident workforce because                                                               
there  has  not  yet  been  a  significant  spike  in  first-time                                                               
employment, the housing  market is healthy, and there  has been a                                                               
net migration  to the Mat-Su Borough  due to high costs  and lack                                                               
of affordable housing in Anchorage.                                                                                             
                                                                                                                                
CHAIR COSTELLO  said she appreciates  the clarifications.  It was                                                               
surprising  to hear  from economists  that  housing in  Anchorage                                                               
hasn't been challenged.                                                                                                         
                                                                                                                                
^ Kenai Peninsula Economic Development District                                                                                 
CHAIR  COSTELLO  welcomed Tim  Dillon  from  the Kenai  Peninsula                                                               
Economic Development District.                                                                                                  
                                                                                                                                
2:00:52 PM                                                                                                                    
TIM   DILLON,  Executive   Director,  Kenai   Peninsula  Economic                                                               
Development District  (KPEDD), provided information on  the Kenai                                                               
Peninsula  Economic Development  District's economic  development                                                               
plan. He said  KPEDD is a two-person  Alaska Regional Development                                                               
Organization  (ARDOR) with  a 12-person  board.  He related  that                                                               
KPEDD  has been  seeing job  losses of  2.4 percent.  They had  a                                                               
small decline in construction in  the specialty trades, but saw a                                                               
small  bump  in heavy  construction  employment  due to  the  new                                                               
Soldotna hospital  building. The  population in the  district was                                                               
up .65 percent.                                                                                                                 
                                                                                                                                
He explained  that KPEDD is  a 501c(4) with funding  sources from                                                               
the Kenai Peninsula Borough, the  U.S. Department of Commerce and                                                               
Economic    Development   Administration,    and   the    renewed                                                               
organization ARDOR  from the state.  He spoke of  another funding                                                               
asset  called  the  "incubator",  20  offices  and  acreage  that                                                               
provide rental income. He noted  their sister organization, Kenai                                                               
Peninsula   Opportunities,   a   501c(3),  which   contains   the                                                               
construction academy.                                                                                                           
                                                                                                                                
2:03:26 PM                                                                                                                    
MR. DILLON  discussed KPEED's most recent  comprehensive economic                                                               
development  strategy. The  process  started in  August 2015  and                                                               
finished in  June 2016  and involved  the Board,  community focus                                                               
groups,  and  the  University of  Alaska's  Center  for  Economic                                                               
Development.  He stressed  the  importance of  buy-in from  local                                                               
businesses. The plan goes through 2021 and has six broad goals.                                                                 
                                                                                                                                
The   first   goal   is   developing   and   enhancing   regional                                                               
partnerships. The  second goal  is developing  infrastructure and                                                               
technology. The third goal is  workforce and human capital, which                                                               
is  working  with  educational  and  training  institutions.  The                                                               
fourth  goal is  developing a  more robust  business climate  and                                                               
entrepreneurship. He described the micro  loan program. The fifth                                                               
goal  is quality  of place.  People need  to be  safe, have  good                                                               
schools  and   good  recreational  opportunities.  Goal   six  is                                                               
knowledge  creation  and  dissemination.   They  put  together  a                                                               
situation  and  prospects  book to  help  attract  business,  and                                                               
recently held  a forum to  distribute the information.  They have                                                               
just formed a partnership with AEDC to produce appropriate data.                                                                
                                                                                                                                
2:11:13 PM                                                                                                                    
CHAIR COSTELLO  thanked Mr. Dillon  and said he would  be hearing                                                               
from her.                                                                                                                       
                                                                                                                                
MR.  DILLON  spoke  of  the  importance  of  having  stakeholders                                                               
involved in the process.                                                                                                        
                                                                                                                                
2:12:20 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
^Southeast Conference                                                                                                           
2:13:52 PM                                                                                                                    
CHAIR  COSTELLO   reconvened  the   meeting.  She   welcomed  the                                                               
Southeast Conference members  Robert Venebles, Meilani Schijvens,                                                               
and Shelly Wright.                                                                                                              
                                                                                                                                
2:15:21 PM                                                                                                                    
SHELLY   WRIGHT,   Executive  Director,   Southeast   Conference,                                                               
presented information on Southeast  Conference's role in economic                                                               
development.  She  thanked the  committee  for  hearing from  the                                                               
Alaska  Regional   Development  Organizations  (ARDOR)   and  for                                                               
highlighting   the  value   of   a  good   economy  and   healthy                                                               
communities. She said they have  been in existence since 1958 and                                                               
their mission  is to build strong  economies, healthy communities                                                               
and a quality environment by  forming partnerships and creating a                                                               
regional  plan  that  all  members  can  use  in  their  planning                                                               
processes. Their motto is "think local and plan regional."                                                                      
                                                                                                                                
MEILANI  SCHIJVENS, Economic  Planner, Rain  Coast Data,  Member,                                                               
Southeast   Conference,   presented  information   on   Southeast                                                               
Conference's  economic  development  plan.  She  said  she  would                                                               
present the  current state of  Alaska's economy and  then provide                                                               
an overview of the Southeast Alaska Economic Plan.                                                                              
                                                                                                                                
She related that  Southeast Alaska is 500 miles long  and made up                                                               
of  mainland  and  over  1,000  islands,  with  18,500  miles  of                                                               
saltwater shoreline.  Southeast Alaska  has 34  communities, with                                                               
10 percent of  Alaska's population, about 10  percent of Alaska's                                                               
overall economy,  11 percent of all  jobs, and 10 percent  of all                                                               
wages.  From   statehood  to  the   1990s,  the   population  and                                                               
employment levels in  Southeast Alaska more than  doubled and its                                                               
economy  was strong.  In the  1990s  Southeast lost  most of  its                                                               
timber industry  and for the  next 16 years, entered  a sustained                                                               
economic  decline. The  last year  of the  decline was  2007, and                                                               
from 2008 to 2015 the economy improved.                                                                                         
                                                                                                                                
MS. SCHIJVENS explained that, currently,  the question is how the                                                               
impact  of the  state's fiscal  crisis will  impact the  regional                                                               
economy. Based on  the 2016 data, she maintained  that the impact                                                               
to Southeast  Alaska will  continue to be  a major  challenge. In                                                               
2016, jobs declined  by 1.4 percent or 600  jobs, slightly better                                                               
than the state did overall.                                                                                                     
                                                                                                                                
She pointed  out that  Southeast Alaska  also lost  population in                                                               
2016.  The loss  was about  500 people,  400 of  which came  from                                                               
Juneau alone, the third largest drop in the history of Juneau.                                                                  
                                                                                                                                
CHAIR  COSTELLO  asked if  the  population  is currently  73,812,                                                               
including an increase during the summer.                                                                                        
                                                                                                                                
MS. SCHIJVENS  said yes, there  is a huge increase  in employment                                                               
in the summer. The population is  counted as a single number once                                                               
a year.                                                                                                                         
                                                                                                                                
CHAIR  COSTELLO asked  Ms. Schijvens  if  she has  the data  that                                                               
shows the summer population increase.                                                                                           
                                                                                                                                
MS.  SCHIJVENS  agreed   that  there  is  a   large  increase  in                                                               
employment in  the summer  due to tourism  and growth  in certain                                                               
industries.                                                                                                                     
                                                                                                                                
She showed  a slide  that illustrates  Southeast employment  as a                                                               
percent of  all earnings, compared to  the state as a  whole. The                                                               
most  important sectors  of  the economy  were  government at  35                                                               
percent, seafood  at 12  percent, and the  visitor industry  at 9                                                               
percent.                                                                                                                        
                                                                                                                                
CHAIR COSTELLO asked  what percentage of the  government jobs are                                                               
federal.                                                                                                                        
                                                                                                                                
MS. SCHIJVENS noted that information was on the next slide.                                                                     
                                                                                                                                
She continued to say that  Southeast's "three-legged stool" looks                                                               
a lot  different than Alaska's  because there  is no oil  and gas                                                               
industry employment.  In total, oil  and gas makes up  11 percent                                                               
of all  employment earnings.  That means  that Southeast  is more                                                               
sensitive  to loss  of employment  and state  spending, but  less                                                               
sensitive to declines in oil and gas development.                                                                               
                                                                                                                                
MS. SCHIJVENS  said federal  government jobs  equal 8  percent of                                                               
all  regional wages,  and  state  jobs equal  14  percent of  all                                                               
regional  wages. State  government  in Juneau  accounts for  more                                                               
than a quarter of all local wages.                                                                                              
                                                                                                                                
She said  preliminary job numbers for  2016 are grim with  a loss                                                               
of  425 jobs  in the  government sector,  almost all  state jobs.                                                               
Further cuts of 200 Southeast jobs are projected.                                                                               
                                                                                                                                
CHAIR  COSTELLO said  legislators are  interested in  whether the                                                               
lost jobs were filled positions.                                                                                                
                                                                                                                                
MS.  SCHIJVENS  said she  doesn't  have  the breakdown,  but  she                                                               
understands that  many of the  jobs were lost  through attrition.                                                               
The  number  she quoted  was  the  average  job numbers  over  12                                                               
months.                                                                                                                         
                                                                                                                                
CHAIR  COSTELLO  said  she  would   continue  to  look  for  that                                                               
information.                                                                                                                    
                                                                                                                                
MS. SCHIJVENS reported that 600  jobs have been reduced from 2014                                                               
through 2016, an 11 percent  reduction. Most of those losses were                                                               
from Juneau.                                                                                                                    
                                                                                                                                
2:24:46 PM                                                                                                                    
She continued to  say that reduced state spending  has a negative                                                               
impact on private sector jobs.  Construction jobs fell by 90 jobs                                                               
or 4 percent  in 2016. Legislative capital  appropriations in the                                                               
region  have already  dropped  by 88  percent  from FY13  levels.                                                               
Projection  for  2017  show  a   loss  of  another  100  jobs  in                                                               
construction.                                                                                                                   
                                                                                                                                
She said timber industry jobs  declined by 2 percent, the fastest                                                               
declining  industry, which  is projected  to continue  to decline                                                               
due to  a variety  of federal  factors. She  noted that  the U.S.                                                               
Forest  Service  manages  about  78   percent  of  the  lands  in                                                               
Southeast  Alaska  - the  Tongass  National  Forest -  while  the                                                               
federal government manages  94 percent of all  lands in Southeast                                                               
Alaska.                                                                                                                         
                                                                                                                                
2:26:28 PM                                                                                                                    
MS.  SCHIJVENS  reported  that   the  visitor  industry  has  the                                                               
strongest  outlook of  any industry  in  Southeast Alaska.  There                                                               
were 500  new tourism jobs  and 1,500 jobs since  2010. One-third                                                               
of visitor spending  occurs in Southeast Alaska and  2016 was the                                                               
best  year  ever.  There  were  record  numbers  of  visitors  on                                                               
ferries, by air, and on cruise ships.                                                                                           
                                                                                                                                
CHAIR COSTELLO asked  if she had information about  the number of                                                               
independent travelers who were first cruise ship passengers.                                                                    
                                                                                                                                
MS. SCHIJVENS said no. She offered to provide that information.                                                                 
                                                                                                                                
She  noted an  industry concern  due  to deep  reductions in  the                                                               
Alaska Tourism Marketing budget.                                                                                                
                                                                                                                                
She  related that  mining is  another growing  industry. Maritime                                                               
jobs  and  wages  are  also bright  spots.  In  Southeast  Alaska                                                               
maritime  wages make  up more  than  a quarter  of all  workforce                                                               
earnings. In  the past five  years 1,000  jobs were added  to the                                                               
economy resulting in a 35  percent increase in wage earnings. The                                                               
largest  component   of  the  maritime  sector   is  the  seafood                                                               
industry, which accounts for two-thirds of maritime jobs.                                                                       
                                                                                                                                
In 2016  the regional fishing  industry experienced a  rough year                                                               
due  to a  lower pink  salmon  run and  lower prices,  but it  is                                                               
expected to improve in 2017.                                                                                                    
                                                                                                                                
2:30:02 PM                                                                                                                    
MS.  SCHIJVENS  stated  that Southeast  Conference  released  its                                                               
five-year  plan  about  6  months ago.  It  builds  on  Southeast                                                               
Alaska's strengths  and creates a blueprint  for economic growth.                                                               
She emphasized  the importance  of ownership of  the plan  by the                                                               
people for which it is  being developed. She shared the strengths                                                               
and weaknesses, opportunities and threats that were quantified.                                                                 
                                                                                                                                
She  said  the  economic  resiliency  strategies  are  to  reduce                                                               
business  costs,  continue  to  focus  on  economic  development,                                                               
reduce  government spending,  increase state  revenues through  a                                                               
mix of taxes, and maintain ferry services.                                                                                      
                                                                                                                                
SENATOR  GARDNER  noted  the  apparent   lack  of  importance  of                                                               
maintaining the ferry system.                                                                                                   
                                                                                                                                
MS.  SCHIJVENS   explained  that  the  number   of  responses  is                                                               
reflected in the size of  the font. She reinforced the importance                                                               
of maintaining the ferry system.                                                                                                
                                                                                                                                
SENATOR GARDNER suggested that the  first two items cannot happen                                                               
unless the fifth one happens.                                                                                                   
                                                                                                                                
MS. SCHIJVENS agreed.                                                                                                           
                                                                                                                                
2:34:11 PM                                                                                                                    
MS. SCHIJVENS  noted 47  objectives for  growing the  economy. Of                                                               
those, eight were prioritized for a work plan moving forward:                                                                   
1.  AMHS Reform Project and support longevity                                                                                   
2.  Promote regional energy projects                                                                                            
3.  Diesel displacement                                                                                                         
4.  Maritime workforce development implementation                                                                               
5.   Full   seafood  resource   utilization  and   ocean  product                                                               
     development                                                                                                                
6.  Grow Alaska Mariculture Initiative.                                                                                         
7.  Market Southeast Alaska visitor opportunities                                                                               
8.   Secure an  adequate economic timber supply  from the federal                                                               
     government.                                                                                                                
                                                                                                                                
SENATOR  GARDNER   asked  about   an  Alaska   Seafood  Marketing                                                               
Institute (ASMI) project to  develop value-added seafood products                                                               
for export.                                                                                                                     
                                                                                                                                
MS. SCHIJVENS said  they are working to develop a  variety of new                                                               
seafood products  such as human-grade  protein powder  and smoked                                                               
salmon  ice cream.  She listed  other specific  areas that  are a                                                               
focus.                                                                                                                          
                                                                                                                                
SENATOR GARDNER  asked if  the Alaska Symphony  of Seafood  is in                                                               
Seattle.                                                                                                                        
                                                                                                                                
MS. SCHIJVENS replied it will be in Juneau this year.                                                                           
                                                                                                                                
SENATOR  HUGHES asked  if the  focus on  liquid natural  gas will                                                               
affect  the  seafood  marketing  office  in  Tokyo  and  have  an                                                               
economic impact on Southeast Alaska.                                                                                            
                                                                                                                                
MS. SCHIJVENS said she didn't have a specific answer.                                                                           
                                                                                                                                
She mentioned  Southeast Conference's goals of  strengthening the                                                               
mariculture, tourism, and timber industries in Southeast Alaska.                                                                
                                                                                                                                
SENATOR GARDNER  asked if anyone  is working on  exporting timber                                                               
in the round or value-added products in the timber industry.                                                                    
                                                                                                                                
MS. SCHIJVENS said  the Viking Mill is the last  mid-size mill in                                                               
Southeast  Alaska and  the  goal is  to  have maximum  production                                                               
taking place.  When there  is an economic  timber sale,  there is                                                               
enough high-quality wood  for Viking to process  without the need                                                               
to export it.                                                                                                                   
                                                                                                                                
MS. WRIGHT  added that there are  a lot of small  businesses that                                                               
are  developing  wood  products,   but,  for  a  thriving  timber                                                               
industry there is a lot of work to do.                                                                                          
                                                                                                                                
2:43:27 PM                                                                                                                    
SENATOR MEYER  said it  seems that mining  potential is  great in                                                               
Southeast Alaska.  He asked why mining isn't a priority.                                                                        
                                                                                                                                
MS. SCHIJVENS said they have a  mining objective, but it isn't in                                                               
the top eight.  Mining is not something  Southeast Conference can                                                               
work on or move forward.                                                                                                        
                                                                                                                                
MS. WRIGHT added  that the 8 priorities are the  focus this year,                                                               
and if  there is any  mining activity  on Prince of  Wales Island                                                               
next year there could be a focus on mining.                                                                                     
                                                                                                                                
CHAIR  COSTELLO asked  Ms. Wright  to  clarify whether  Southeast                                                               
Conference's  plan   is  driven   by  an  economic   analysis  or                                                               
priorities of members.                                                                                                          
                                                                                                                                
MS.  WRIGHT  explained  that Southeast  Conferences'  initiatives                                                               
were  based on  objectives important  to regional  members. Right                                                               
now, the  8 objectives were  of the highest importance,  but they                                                               
are fluid and reevaluated every six months.                                                                                     
                                                                                                                                
SENATOR GARDNER  asked if there  is any development on  Prince of                                                               
Wales Island of rare earth minerals.                                                                                            
                                                                                                                                
MS.  WRIGHT   said  the  developers   are  having   trouble  with                                                               
investment in these economic times.                                                                                             
                                                                                                                                
SENATOR HUGHES  thanked the presenter.  She pointed out  that the                                                               
revenue from the oil and gas  industry is what has paid for state                                                               
government and it  is important to be sensitive to  the health of                                                               
that  industry. She  asked what  Southeast Conference's  strategy                                                               
for energy  legislation is and  whether they are putting  forth a                                                               
bill this session.                                                                                                              
                                                                                                                                
2:50:43 PM                                                                                                                    
ROBERT  VENEBLES,   Energy  Coordinator,   Southeast  Conference,                                                               
presented information on Southeast  Conference's energy goals. He                                                               
responded that  their focus  is mostly  on federal  energy bills,                                                               
however, they  are supportive of Alaska  Energy Authority's work.                                                               
They aren't  introducing any stand-alone bills,  but they support                                                               
the bills going through Congress.                                                                                               
                                                                                                                                
2:52:51 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
^ Department of Commerce, Community and Economic Development                                                                    
2:55:09 PM                                                                                                                    
CHAIR COSTELLO reconvened the  meeting. She welcomed Commissioner                                                               
Hladick,  Britteny  Cioni-Haywood,  and   Ethan  Tyler  from  the                                                               
Department of Commerce, Community and Economic Development.                                                                     
                                                                                                                                
2:56:07 PM                                                                                                                    
CHRIS  HLADICK, Commissioner,  Department of  Commerce, Community                                                               
and Economic  Development (DCCED), said the  initiative they have                                                               
in  DCCED  will  fit  nicely  with  what  other  Alaska  Regional                                                               
Development  Organizations  (ARDORs)  have been  working  on.  He                                                               
thanked  the committee  for hosting  this discussion  and Senator                                                               
Hughes, Bill Popp, Shelly Wright,  Tim Dillon, Meilani Schijvens,                                                               
and  Chris   Naoroz  for  sitting  on   the  initiative  steering                                                               
committee.                                                                                                                      
                                                                                                                                
COMMISSIONER  HLADICK  shared  his experience  coming  to  Juneau                                                               
after 25 years  in rural Alaska where costs  are high. Addressing                                                               
Senator  Costello's previous  question about  how much  money was                                                               
left in  the grants pipeline, he  said when he arrived  in Juneau                                                               
in 2015,  there was $2.1 billion  in the pipeline, and  now there                                                               
is about $900 million left,  $500 million of which is encumbered.                                                               
He said  there would be  a report  released next week  on capital                                                               
grants.                                                                                                                         
                                                                                                                                
He noted that  any money spent in rural Alaska  comes back to the                                                               
major  population  centers.  Now,   there  is  a  paradigm  shift                                                               
regarding loan  programs and there is  a lot of work  to be done;                                                               
the question is  how to get the work done.  Those projects return                                                               
money  to  the  economy.  He  explained  that  the  Comprehensive                                                               
Economic  Development   Strategy  (CEDS)  is  developed   by  the                                                               
Division  of U.S.  Economic  Development  Administration and  has                                                               
received funding support  from a $100,000 grant. It  is a process                                                               
that works and will  be a tool for the state  to focus on getting                                                               
the most results.                                                                                                               
                                                                                                                                
SENATOR  MEYER  talked  about  the  tie-in to  the  oil  and  gas                                                               
industry,  stressing that  is where  construction and  other jobs                                                               
come  from,  as  well  as   funding  for  education  and  capital                                                               
projects. He  suggested a  need to  education people  about where                                                               
the state gets its money.                                                                                                       
                                                                                                                                
3:01:15 PM                                                                                                                    
BRITTENY   CIONI-HAYWOOD,   Director,    Division   of   Economic                                                               
Development,  Department  of  Commerce,  Community  and  Economic                                                               
Development (DCCED), said she would  address what a comprehensive                                                               
economic development  strategy is  and the  department's branding                                                               
effort. She stated the following:                                                                                               
                                                                                                                                
     Economic development planning through  a CEDS serves to                                                                    
     engage  community  leaders, leverage  involvement  from                                                                    
     the   private  sector,   and   establish  a   strategic                                                                    
     blueprint  for  collaboration  moving forward.  A  CEDS                                                                    
     provides  a capacity-building  foundation by  which the                                                                    
     public  sector, by  working in  conjunction with  other                                                                    
     economic    actors,   individuals,    businesses,   and                                                                    
     industries,   creates  an   environment  for   original                                                                    
     economic prosperity. A CEDS is  the result of regional-                                                                    
     owned  planning processes  and  designed  to build  the                                                                    
     capacity  and to  guide us  in our  economic prosperity                                                                    
     and resiliency for an area or a region.                                                                                    
                                                                                                                                
She added  that most of  the ARDORs  have this process  in place.                                                               
The Division of Economic Development  brings it up to a statewide                                                               
level.                                                                                                                          
                                                                                                                                
3:02:56 PM                                                                                                                    
MS. CIONI-HAYWOOD pointed out that  the CEDS needs to incorporate                                                               
the concept of resiliency -  the ability to avoid, withstand, and                                                               
move past from  either economic shifts or  natural disasters. The                                                               
CEDS  named  Northern  Opportunity  is going  to  build  on  past                                                               
efforts  and  existing  regional  CEDS  as  the  foundation.  The                                                               
project   is   guided   by    the   U.S.   Economic   Development                                                               
Administration and  is funded by  a grant for the  initial phase.                                                               
The process  is overseen  by a  Strategic Committee  comprised of                                                               
industry and  community leaders. She concluded  that the Division                                                               
is  partnering with  the ARDORs  and  other economic  development                                                               
organizations.                                                                                                                  
                                                                                                                                
3:03:56 PM                                                                                                                    
ETHAN   TYLER,  Manager,   Division   of  Economic   Development,                                                               
presented said  he will discuss  the branding  opportunity called                                                               
Northern Opportunity.  He explained that  the approach is  one of                                                               
inclusiveness;  it  is  a  bottom-built   strategy.  There  is  a                                                               
research  component   to  assess  the  economic   conditions  and                                                               
engagement  in community  forums, visiting  with communities  and                                                               
business leaders  around the state. They  have conducted industry                                                               
forums and will set up a business survey to gather information.                                                                 
                                                                                                                                
He spoke of the Strategy  Committee that provides information and                                                               
represents the  diversity of Alaska  by region and  industry. The                                                               
group  has  been  helpful,  almost  like  a  nonprofit  board  of                                                               
directors.                                                                                                                      
                                                                                                                                
3:07:38 PM                                                                                                                    
MR. TYLER  listed the  community forums  they have  completed and                                                               
those that are in progress. The  point of the outreach is to have                                                               
broad-based stakeholder participation.                                                                                          
                                                                                                                                
He provided a snapshot of  industry input and listed the industry                                                               
groups the Division of Economic Development has worked with.                                                                    
                                                                                                                                
3:09:08 PM                                                                                                                    
MS. CIONI-HAYWOOD read the initial vision and mission statement:                                                                
                                                                                                                                
     VISION                                                                                                                     
     Alaska will have a stable and sustainable economy that                                                                     
     generates quality jobs, capital investment, and new                                                                        
     revenue to benefit the people and businesses of                                                                            
     Alaska.                                                                                                                    
                                                                                                                                
     MISSION STATEMENT                                                                                                          
     The purpose of  Northern Opportunity: Alaska's Economic                                                                    
     Strategy  is to  arrive at  a consensus  among Alaskans                                                                    
     regarding  our economic  future, which  will result  in                                                                    
     the articulation of priorities  and goals for the state                                                                    
     economy. These efforts will  promote new investment and                                                                    
     economic opportunity for the benefit of all Alaskans.                                                                      
                                                                                                                                
3:10:47 PM                                                                                                                    
She noted  their website -  NorthernOpportunity.com -  which will                                                               
have a business survey soon, as well as updates on the process.                                                                 
                                                                                                                                
She reported that  the public survey garnered  600 responses. The                                                               
process  was  representative  of   the  population  and  reflects                                                               
population centers throughout the state.                                                                                        
                                                                                                                                
3:12:45 PM                                                                                                                    
MR.  TYLER  addressed  the  preliminary  results  of  the  public                                                               
survey. Most  of the questions  were open-ended, and they  are in                                                               
the process of analyzing the  results. One of the questions asked                                                               
why  they chose  to live  in  Alaska. Just  over one-third  cited                                                               
nature and the  environment as the reason; the  second most cited                                                               
reason was people and family.                                                                                                   
                                                                                                                                
3:14:37 PM                                                                                                                    
He showed  the results of  another question they asked  about the                                                               
biggest  opportunities in  Alaska. The  most responses  cited the                                                               
visitor industry and  resource development - mining,  and oil and                                                               
gas. In response to the question  what would make Alaska a better                                                               
place  to live,  responses  showed that  wanting  a more  diverse                                                               
economic economy was  the top choice, followed by  a cheaper cost                                                               
of living.                                                                                                                      
                                                                                                                                
3:16:17 PM                                                                                                                    
MS.   CIONI-HAYWOOD  noted   they  would   launch  the   Northern                                                               
Opportunity  Business  Survey  next  week.  They  will  look  for                                                               
background   information,   business  confidence,   barriers   to                                                               
business  growth  or  success,  strategies  to  enhance  economic                                                               
growth, and what would expand growth going forward.                                                                             
                                                                                                                                
She  said,  based  on  the  input  they've  received,  they  have                                                               
identified  preliminary  goal   areas:  finance  and  investment,                                                               
business    development,    innovation   and    entrepreneurship,                                                               
enterprise infrastructure, and workforce development.                                                                           
                                                                                                                                
3:21:29 PM                                                                                                                    
She discussed what comes next in  the process. She said they plan                                                               
to  complete  the  information gathering  and  public  engagement                                                               
process and then draft a  document with Strategy Committee input.                                                               
After that  will be a public  comment period of thirty  days. The                                                               
final strategy  will be released and  implemented. Yearly updates                                                               
will  be  done  based  on implementation  and  changing  economic                                                               
conditions. There will also be a five-year review and rewrite.                                                                  
                                                                                                                                
She  concluded  that the  Northern  Opportunity  process needs  a                                                               
serious  commitment  for  measurable economic  progress  and  the                                                               
growing need for integrated planning and statewide coordination.                                                                
                                                                                                                                
3:22:42 PM                                                                                                                    
COMMISSIONER HLADICK discussed some  strategies going forward. He                                                               
reported that  there have been  four initiatives in the  last few                                                               
years, none of  which has gotten to the  implementation plan. The                                                               
legislature even  had an Economic Development  Commission for two                                                               
years from 2010-2012. After the  CEDS is finished, the department                                                               
must  figure   out  governance  and   structure  and   gage  what                                                               
public/private partnership  looks like. The department  must also                                                               
gage private enterprise's willingness  to become involve and have                                                               
an economic summit for industry participation.                                                                                  
                                                                                                                                
He  opined that  the governance  of this  CEDS should  largely be                                                               
outside of  state government due  to administration  turnover. It                                                               
needs to be built from the  bottom up and have private enterprise                                                               
and industry participation for a decade or longer.                                                                              
                                                                                                                                
CHAIR COSTELLO agreed that the  state has failed to diversify the                                                               
economy. The  equity crowd-investing  bill that passed  last year                                                               
ties into  the concept  that economic growth  happens at  a local                                                               
level.                                                                                                                          
                                                                                                                                
She applauded  DCCED's work  and thanked  Senator Hughes  for her                                                               
work in  supporting ARDORs.  She stated  that the  department has                                                               
the  full commitment  of the  committee regarding  how the  state                                                               
moves  forward. She  agreed with  Commissioner Hladick's  view on                                                               
the government's  role and  said she  looks forward  to continued                                                               
discussions with the department.                                                                                                
                                                                                                                                
She outlined the agenda for next week.                                                                                          
                                                                                                                                
3:27:35 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Costello  adjourned the Senate Labor  and Commerce Standing                                                               
Committee meeting at 3:27 p.m.                                                                                                  

Document Name Date/Time Subjects
2017.01.26 - AEDC Employment Report Ninth Edition.pdf SL&C 1/26/2017 1:30:00 PM
2017.01.26 - KPEDD Senate Labor & Commerce Committee Presentation.pdf SL&C 1/26/2017 1:30:00 PM
2017.01.26 - Northern Opportunity DCCED.pdf SL&C 1/26/2017 1:30:00 PM
2017.01.26 - SEC Annual Report 2016.pdf SL&C 1/26/2017 1:30:00 PM
2017.01.26 - Southeast Alaska By Numbers.pdf SL&C 1/26/2017 1:30:00 PM