04/16/2010 02:55 PM Senate FIN

CS FOR HOUSE BILL NO. 412(FIN)                                                                                                  
                                                                                                                                
     "An  Act establishing  the  Alaska microloan  revolving                                                                    
     fund;  making loans  for commercial  purposes from  the                                                                    
     fund;  relating to  the fund  and loans;  and providing                                                                    
     for an effective date."                                                                                                    
                                                                                                                                
3:08:46 PM                                                                                                                    
                                                                                                                                
GREG  WINEGAR,  DIRECTOR,  ALASKA DIVISION  OF  INVESTMENTS,                                                                    
DEPARTMENT OF COMMERCE,  COMMUNITY AND ECONOMIC DEVELOPMENT,                                                                    
explained that  the bill is  modeled after  other micro-loan                                                                    
programs  offered throughout  the United  States. A  similar                                                                    
program is  not yet available in  Alaska due to a  lack of a                                                                    
qualified  intermediary  lender  as required  by  the  Small                                                                    
Business  Association  (SBA).  He   expounded  the  goal  of                                                                    
providing loans  for up  to $35  thousand for  an individual                                                                    
and  $70 thousand  for  two or  more  individuals. The  loan                                                                    
proceeds  are  available  for  working  capital,  inventory,                                                                    
lease   hold  improvements,   and  other   business  related                                                                    
matters. The loans must be  collateralized. He informed that                                                                    
the fiscal note requests  $81 thousand in operating expenses                                                                    
to hire  a loan officer  to process loan requests.  The fund                                                                    
is established as a revolving  fund. The department supports                                                                    
the bill.                                                                                                                       
                                                                                                                                
3:11:13 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  pointed  out  one fiscal  note  from  the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED) for $3,577,700 in  Alaska Industrial Development and                                                                    
Export Authority  (AIDEA) dividends to capitalize  the fund.                                                                    
He expressed concern with the  issue of capitalization as it                                                                    
is  abnormal to  capitalize a  fund with  a fiscal  note. He                                                                    
cited  an  over  appropriation  of the  fund.  According  to                                                                    
Legislative Finance,  the AIDEA funds have  been expended in                                                                    
the  FY11 budget.  He asked  about  the state  as a  banking                                                                    
institution versus the private sector.                                                                                          
                                                                                                                                
Mr. Winegar responded that he  was under the assumption that                                                                    
a  new fiscal  note had  been prepared.  He stated  that the                                                                    
loan amounts are  small and short term with  higher risk. He                                                                    
stated that the SBA makes  the program available in 46 other                                                                    
states for the same reason.                                                                                                     
                                                                                                                                
3:13:09 PM                                                                                                                    
                                                                                                                                
TED  LEONARD,  EXECUTIVE  DIRECTOR, AIDEA  stated  that  the                                                                    
proposed loan program is not  an AIDEA program. He mentioned                                                                    
that  AIDEA's  strategic  planning  process  during  a  spot                                                                    
analysis  of the  Alaska  economy identified  a  gap in  the                                                                    
tools available to help small  businesses. He voiced that he                                                                    
was  once the  Chief  Financial Officer  (CFO)  for a  small                                                                    
corporation. He explained  that cash flow is the  blood of a                                                                    
small  business. The  business cycles  do ebb  and flow  and                                                                    
occasionally a business requires a  loan to allow a business                                                                    
to continue.  He stated that the  small economic development                                                                    
supported  the  need  for   helping  small  businesses  with                                                                    
capital. While the  program is not an AIDEA  program, he did                                                                    
support the  goal of helping  small businesses  with working                                                                    
capital.                                                                                                                        
                                                                                                                                
3:15:06 PM                                                                                                                    
                                                                                                                                
CARL  BERGER, EXECUTIVE  DIRECTOR, LOWER  KUSKOKWIM ECONOMIC                                                                    
COUNCIL  (via teleconference)  testified in  support of  the                                                                    
legislation.  He noted  that the  support  extends to  other                                                                    
small  communities.  The  amount provided  is  exactly  what                                                                    
communities require.  He stated that  Alaska is one  of four                                                                    
states without a microloan program.                                                                                             
                                                                                                                                
MIKE BORGFORD,  MADE IN MAT-SU, MATSU  (via teleconference),                                                                    
testified in support of the  legislation. He claimed that HB
  was the  most important  small business  legislation in                                                                    
the last 30 years.                                                                                                              
                                                                                                                                
MARTY  METIVA, PRESIDENT,  ALASKA  PARTNERSHIP FOR  ECONOMIC                                                                    
DEVELOPMENT  (via teleconference),  testified in  support of                                                                    
the legislation.  He stated that  the situation  analysis of                                                                    
the state's  economy provided a statewide  economic strategy                                                                    
implementation plan.  He stated that  the raw data  from the                                                                    
analysis  includes that  from  over  300 business  community                                                                    
leaders.  He  noted  that the  two  key  findings  addressed                                                                    
include the access  to the capitol. He believed  that HB 412                                                                    
compliments the existing financing opportunities.                                                                               
                                                                                                                                
3:20:47 PM                                                                                                                    
                                                                                                                                
TRACY LABARGE,  TRACY'S KING CRAB SHACK,  testified that she                                                                    
is a small  business owner who purchases  her inventory form                                                                    
local   fisheries.   She   worked   with   Juneau   Economic                                                                    
Development  Council (JEDC)  and  local  banks to  establish                                                                    
creative methods of financing.  She stated that she requires                                                                    
a loan for inventory. She  stressed that the bill allows her                                                                    
business the opportunity for success.                                                                                           
                                                                                                                                
3:23:17 PM                                                                                                                    
                                                                                                                                
Senator  Olson   asked  if  $35   thousand  was   enough  to                                                                    
capitalize a small business. Mr.  Winegar responded that the                                                                    
amount of $35  thousand is patterned after  the SBA program.                                                                    
The  private  sector is  a  better  place to  obtain  larger                                                                    
amounts  of  capital.  He  specified  that  HB  412  targets                                                                    
smaller loans.                                                                                                                  
                                                                                                                                
HB  412  was  HEARD  and   HELD  in  Committee  for  further                                                                    
consideration.