Legislature(2019 - 2020)Anch LIO Lg Conf Rm
05/01/2020 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Coronavirus Aid, Relief, and Economic Security Act - Department of Commerce, Community and Economic Development | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
ANCHORAGE LIO
May 1, 2020
9:01 a.m.
9:01:52 AM
[Note: meeting took place in the Anchorage LIO and was
recorded from Juneau.]
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 9:01 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Jennifer Johnston, Co-Chair
Representative Dan Ortiz, Vice-Chair (via teleconference)
Representative Ben Carpenter (via teleconference)
Representative Andy Josephson (via teleconference)
Representative Gary Knopp (via teleconference)
Representative Bart LeBon (via teleconference)
Representative Kelly Merrick (via teleconference)
Representative Colleen Sullivan-Leonard(via teleconference)
Representative Cathy Tilton (via teleconference)
Representative Adam Wool (via teleconference)
MEMBERS ABSENT
None
PRESENT VIA TELECONFERENCE
Julie Anderson, Commissioner, Department of Commerce,
Community and Economic Development; Micaela Fowler,
Administrative Services Director, Department of Commerce,
Community and Economic Development, Office of Management
and Budget, Office of the Governor; Sandra Moller,
Director, Division of Community and Regional Affairs; Alan
Weitzner, Chief Investment Officer, Alaska Industrial
Development and Export Authority, Department of Commerce,
Community and Economic Development; Neil Steininger,
Director, Office of Management and Budget, Office of the
Governor; Representative Bryce Edgmon; Representative Ivy
Spohnholz; Representative Geran Tarr.
SUMMARY
PRESENTATION: CORONAVIRUS AID, RELIEF, and ECONOMIC
SECURITY ACT - DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT
Co-Chair Foster reviewed the meeting agenda. He asked
members to hold questions until the end of the
presentation:
^PRESENTATION: CORONAVIRUS AID, RELIEF, and ECONOMIC
SECURITY ACT - DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT
9:04:19 AM
JULIE ANDERSON, COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT (via teleconference),
introduced a PowerPoint presentation titled "COVID-19 and
C.A.R.E.S. Act Funding Presentation," dated May 1, 2020
(copy on file). She noted that the presentation would focus
on proposed distribution of funds. She took a moment to
highlight other COVID-19 efforts. She noted that
corrections and submissions to the proposed C.A.R.E.S Act
were not included in the presentation. She read from a
prepared statement. She asked staff to address specific
parts of the presentation.
9:07:35 AM
MICAELA FOWLER, ADMINISTRATIVE SERVICES DIRECTOR,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR
(via teleconference), began on slide 2, Direct Municipal
Relief Proposal,:
Direct Municipal Relief Total: $562.5 million (RPL 08-
2020-0250) As proposed by the Governor on 4/21/2020
• The Direct Municipal Relief proposal directs $562.5
million to local governments for immediate costs
related to the COVID-19 pandemic.
• The funding is allocated based on a combination of
available indicators of economic activity and the
community assistance formula.
• Municipalities will report to the Office of
Management and Budget (OMB) monthly on COVID-19
related expenditures.
• Expenditures must comply with US Treasury (Treasury)
guidance and fall within the six categories for
allowable expenditures.
Ms. Fowler read from prepared statement. She relayed that
the department was working on the issues in real time as
issues developed. She noted that questions that the
committee might have could be issues the department was
still grappling with. She stated that there had been
ongoing discussions about the community assistance formula
and the administration was looking into feedback received
by the legislature and communities. She stressed that
expenditures were required to adhere to the federal
treasury specifications. She spoke to the importance of
complying with federal specifications in order to mitigate
any risk. She stressed that the liability for the correct
usage of the funds was shared by the state and the
municipalities.
Ms. Fowler continued to Slide 3, US Treasury Guidelines
highlights,:
The CARES Act provides that payments from the Coronavirus
Relief Fund (Fund) may only be used to cover costs that:
• Are necessary expenditures incurred due to the
public health emergency with respect to the
Coronavirus Disease 2019 (COVID19).
• Were not accounted for in the budget most recently
approved as of March 27, 2020 (the date of enactment
of the CARES Act) for the State or government.
• Were incurred during the period that begins on March
1, 2020, and ends on December 30, 2020.
• State Governments must return unspent or unallowable
expenditures to the Treasury, including those
transferred to a local government.
Funds may not be used to fill shortfalls in government
revenue to cover expenditures that would not otherwise
qualify under the statute.
Ms. Fowler stressed that the unspent funds would have to be
returned to the federal government. She explained that the
commitment agreement that the state will enter with each
individual community will pass the liability from the state
to the local government. She said that the requirement that
all the costs must be incurred prior to the end of the
calendar year had raised questions about the ability for
flexibility to move allocations from one community to
another. She said that at this point the department did not
have a mechanism that would adjust the allocations. She
relayed that it would require legislative action for the
department to develop such a tool. She highlighted that the
funds could not be used to fill budget shortfalls. She
understood that there were competing perspectives as to
whether the guidance from the Treasury was aligned with
congressional intent.
9:12:01 AM
Ms. Fowler related that there was a liability of over $500
million and that all the departments work in setting up
agreements with communities was based on a very plain
reading of the federal guidance.
Ms. Fowler moved to Slide 4, Financial Management,
Treasury Guidance: Governments must keep records to
demonstrate that expenditures were for allowable
expenditures.
Revised Program Legislative (RPL) Requirement:
Beginning June 1, 2020, municipalities shall
electronically submit, on the first day of each month,
a report to OMB that lists the expenditures used to
cope with the COVID-19 public health emergency.
Proposed Distribution Process: The second and third
disbursements will be made only after 80 percent of
prior disbursements have been expended.
Ms. Fowler shared that the department had been
collaborating with the Office of Management and Budget
(OMB) and the federal government to make sure that the
expectations for the funds were clearly relayed to local
governments. She added that the program had been structured
in a manner that provided the greatest flexibility. The
goal was to provide funds to local governments as soon as
possible. She reminded the committee that the distribution
proposal was different than the department's standard
process. She explained that the funds would be made
available to communities in three separate tranches. She
shared that if 80 percent of the first tranche distribution
had been spent appropriately, and correctly documented, the
second and third tranches would be released. She stressed
that the department was walking the fine line between
mitigating the need to recover funds and maximizing
community flexibility and the need for those funds to be
available to local governments to meet immediate needs.
9:15:39 AM
SANDRA MOLLER, DIRECTOR, DIVISION OF COMMUNITY AND REGIONAL
AFFAIRS (via teleconference), turned to Slide 5, Reporting
and Financial Management:
Allowable Expenditures must fall under six broad
categories:
Medical Expenses.
Public Health Expenses.
Payroll expenses for public safety, public health,
human services, and similar employees whose services
are substantially dedicated to mitigating or
responding to the COVID-19 public health emergency.
Expenses of actions that facilitate compliance with
COVID-19 related public health measures.
Expenses associated with the provision of economic
support in connection with the COVID-19 public health
emergency.
Other COVID-19 related expenses reasonably necessary
to the function of government that satisfy the Fund's
eligibility criteria.
Ms. Moller stated that the reporting requirements would
make it easy for communities to label expenditures under
the broad categories in order to meet reporting
requirements in a streamlined manner.
Ms. Moller moved to Slide 6, "Reporting Requirements":
Direct Municipal Relief grant requirements:
COVID-19 direct distributions will be administered
as an upfront payment, with subsequent payments
dependent on spending down prior distributions.
No distributions will be made without a signed
agreement that places the onus of repayment of
misspent funds on the local government, not the State
of Alaska.
A reporting template is in development that will
direct local governments to list all CARES Fund
expenditures under the appropriate category in an
effort to streamline and simplify reporting.
Local governments are responsible for detailed
record keeping of expenditures, and must make those
records available to the State upon request.
9:17:01 AM
Ms. Fowler shared that Slide 7, Small Business Relief
ended the community distribution update on the current
status of CARES Act funding:
Small Business Relief: $300.0 million (RPL 08-2020-
0251)
(As proposed by the Governor on 4/21/2020)
Funding allocated to the Investments component of the
Department of Commerce, Community, and Economic
Development for Investments, the Alaska Housing
Finance Corporation (AHFC), and the Alaska Industrial
Development and Export Authority (AIDEA) to provide
assistance and relief to businesses impacted by COVID-
19.
Expenditures must comply with federal guidance
released after the allocations were published. DCCED
is working with the Department of Law to determine
whether loan forgiveness is an allowable expense.
She reiterated that all CARES Act funds had the same
federal guidance about allowable expenditures, and that
guidance had come out after the RPLs had been developed.
The department was working with the Department of Law to
determine whether loan forgiveness fit within the federal
specifications. She noted that others would speak to
additional relief programs.
9:19:04 AM
ALAN WEITZNER, CHIEF INVESTMENT OFFICER, ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT AUTHORITY, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT (via teleconference),
spoke to Slide 8, AK SAFE Guaranty Program:
Sustaining Alaska's Future Economy Guaranty Program
AK SAFE"):
Emergency measure for Alaska's businesses affected by
the COVID-19 health and economic emergency.
Authorized to issue guarantees up to $1 million to
businesses for working capital purposes (AS
44.88.500).
Developed in collaboration with Alaska's financial
institutions.
100% Guaranty of new advance under existing loan
agreement.
Provides needed funding to eligible borrows in
addition to the available federal programs.
Initially a $50 million program cap, scalable to $1
billion with authorization for change in statutory
limit.
Mr. Weitzner continued to Slide 9, Emergency Loan and
Guaranty Program:
Direct Lending Program for Alaska's Small Businesses
and Non-Profits:
Emergency Regulations 3AAC 104.000 104.900.
Direct Lending Program to expeditiously address those
small businesses and non-profit organizations unable
to obtain SBA PPP, EIDL, or other federal program
support.
Partnership with one or more Alaska financial
institutions.
Ensure equal access across urban and rural
communities.
Targeted Businesses: 50 or less employees plus
seasonal workforce.
Loan Size: $5,000 to $100,000.
Program need: $150 -$250 million to reach over 3,500
to 5,000 Alaska businesses and non-profits with
meaningful impact.
9:23:00 AM
Alan Weitzner detailed the bullet points on the slide. He
stressed that there were several businesses that would
benefit from the creation of this new funding channel.
9:24:52 AM
Ms. Anderson read from a prepared statement. She said that
the impacts of COVID-19 were felt in the state as early as
January 2020. She noted that the tourist industry would be
especially hard hit, particularly those in rural areas. She
lamented the negative impacts expected across various
industries. She spoke to the awareness of the struggle for
small communities. She stated that the effects of the
health crisis would have serious repercussions in all areas
of Alaska. She believed that state leaders and Alaskans
were making significant progress to support businesses.
9:26:51 AM
Co-Chair Foster recognized that Representative Ivy
Spohnholz was listening in.
Representative LeBon asked about the formula for allocation
of the funds, particularly in Fairbanks and the Mat-Su.
Ms. Fowler replied that funding formula first appropriated
a portion of money to a municipality based on the
municipality type. After that, funding was appropriated on
a per capita basis. She reiterated that $20 million, of the
$257 million, would be appropriated as a base payment to
communities and the remainder would be distributed on a per
capita basis. She explained that as a result of the
formula, the total dollar payment per capita differed from
community to community.
9:28:57 AM
Representative LeBon replied that it did not answer the
question. He considered the impact of COVID-19 on all
communities. He spoke to the variables along the Railbelt
between Anchorage, Mat-Su and Fairbanks. He did not believe
the funding spread should be so wide; $600 per capita in
Mat-Su, $450 per capita in Fairbanks. He opined that
Fairbanks was impacted every bit as much by the situation
as Mat-Su. He had a hard time understanding why the per
capita funding gap was so large. He understood he likely
would not receive a satisfactory answer to his question. He
addressed AIDEA's participation with banks. He wondered
whether all banks were participating, or a select few. He
wondered whether every community was able to participate
with AIDEA and their banking community to help small
businesses.
Mr. Weitzner replied that AIDEA worked directly with the
Alaska Banker Association and directly communicated with
banks on the structure of the AK SAFE program. He relayed
that conversations with the banks had resulted in a
restructuring of new terms adopted by the board. The intent
was that the program would be made available for every
Alaska financial institution to utilize. He identified that
it would be fundamentally up to the individual bank whether
they wanted to work with AIDEA under the direct lending
program.
9:32:56 AM
Co-Chair Foster recognized that Representative Geran Tarr
was listening online.
Vice-Chair Ortiz returned to a question by Representative
LeBon concerning the equal distribution of funds. He
referenced Ms. Fowler's use of the term "community type."
He wondered how the term community type was defined.
Ms. Fowler answered that the term was based on the
statutory community assistance formula, which was utilized
in determining distribution. She said that there were
payments for municipalities, payment for within borough,
and unincorporated communities outside of borough; the data
was continually collected and consistently applied in the
community assistance calculation. She noted that the
assistance calculation and was not new to this
distribution. She was happy to follow up with the committee
to provide the statutory framework.
Vice-Chair Ortiz echoed the commissioners earlier
statement about the importance of getting the funds to
communities and businesses as quickly as possible. He asked
whether the department had done a task of this magnitude in
the past, and whether the department had enough manpower to
accomplish the task.
Commissioner Anderson replied that the department believed,
with the partnership with AIDEA, it could get the funds out
to communities as quickly as possible. She added that the
Division of Investments would work with existing and new
business clients. She said that a $5 million dollar grant
had been requested from ADA to help small businesses, which
AIDEA had agreed to match with $1 million. She stated that
under the existing program, as defined, she believed that
the loans could be processed quickly. She said that the
resource need would be assessed as guidelines changed and
had been reassured by the administration that the
department would have the resources necessary to ensure
quick and efficient implementation of the program.
9:37:09 AM
Representative Carpenter spoke to the length of time
communities could hold onto funds without spending them. He
noted that a community may not have need at first to spend
the funds, but he thought that as the state opened back up
the need may grow. He asked whether the community could
hold onto the funds until the end of the year.
Ms. Fowler responded that the department did not anticipate
fund would be returned until after December 30, 2020, when
additional costs would no longer be eligible expenditures.
Representative Carpenter whether additional funds could be
requested if the first distribution funds were used
completely by the date of the second distribution.
Ms. Fowler answered in the affirmative.
Representative Carpenter asked whether the AK SAFE Program,
and direct lending programs, were part of the $300 million
request for proposal (RPL) 08-2020-0251, and whether there
was a federal requirement to use the funds for loans and
not grants. He wondered whether the loan would be
forgivable under any circumstance.
Mr. Weitzner answered that AIDEA had capital that was
specific to the AK SAFE program and resolutions were in
place to expand the program to operate under Emergency Loan
and Guarantee regulations. He said everything under the
Emergency Loan and Guarantee regulations was linked to an
allocation of funding from the CARES Act funding to the
state. He said he could not speak to terms and criteria of
the federal funding. He believed that the department could
quickly implement a program that could accommodate a
forgiveness program for the states seasonal businesses.
9:42:03 AM
Representative Carpenter spoke to the direct lending
programs. He asked whether any of the loans were interest
bearing. He understood it may change based on the
Department of Law (DOL) guidance.
Mr. Weitzner replied that the program worked in
collaboration with Alaskan financial institutions and was a
guaranteed tranche, in addition to the existing lending
agreement, at the current rate of interest under those loan
agreements. He said that the loans had the same level of
interest - prime plus 200 basis points - effectively 6
percent. He stated that under the Emergency Loan and
Guarantee program the rates had yet to be determined as a
program operator was not in place.
9:44:55 AM
Representative Josephson referenced a statement by Ms.
Fowler about moving monies between communities and that
legislative action may be needed to divine a mechanism. He
lamented that the formula that the department had
established relative to direct cost distribution also
lacked a legislative formula. He was trying to determine
how the department had concern about the former but not the
latter.
Ms. Fowler answered that the distribution included in the
RPL would be approved by the legislative body through the
LB&A Committee. She noted that if he was asking that
leftover CARES funds from Juneau be transferred to
Ketchikan, there was not yet a mechanism for that transfer.
She added that one could be established through work with
DOL and the Legislature.
9:46:57 AM
Representative Josephson discussed that there had been one
advisement for transparency concerning who received grants
and loans. He asked whether the department had considered
such transparency.
Commissioner Anderson answered it was not something the
department was considering at present. She would have to
check with DOL on confidentiality of grant and loan
recipients. She told the committee she would follow up with
the information.
Representative Josephson asserted that he believed in
helping local governments. The committee had heard from the
communities that they were unable to use a portion of the
funds. He asked whether legislators should be concerned
that they were committing dollars that could not be spent
by local governments.
Commissioner Anderson had not heard of the community
concerns on the matter. She deferred to Ms. Moller.
Ms. Moller stated her understanding of the question. She
said that there were no specific requests of what the
amount would be if it was not 45 percent. She stressed that
getting the funds to communities as soon as possible and to
the maximum amount was the intent.
9:50:42 AM
Representative Josephson was surprised - the committee had
a lengthy meeting the previous day, the main topic of which
were city mayors in the state testifying that they would
not be able to use the funds according to federal
guidelines.
Co-Chair Johnston added that the administration was
following the legislative intent of the CARES Act, which
was that 45 percent of the funds would be distributed to
communities. She related that while everyone had concerns
about the federal guidelines, she believed the
administration was trying to follow the legislative intent.
Representative Wool referred to federal guidance on things
the states could use the money for such, as expenditures
related to the provisions of grants to small businesses to
reimburse the cost of business interruption caused by
required closures. He queried why the issue had not been
mentions in the current meeting.
9:53:03 AM
Commissioner Anderson answered that Section 5 of the CARES
Act was related to small business relief. She clarified
that the current presentation had been crafted around
community assistance.
Representative Wool noted that half of the $562 million
would be distributed by the four community types:
• borough - $300,000
• city - $75,000
• unincorporated inside of a borough - $16,000,
unincorporated outside of a borough - $25,000
• The remainder would be divided up, per capita, based
on the entire state population.
Representative Wool lamented that the formula for
distribution of the remaining 50 percent of the $562
million had yet to be disclosed by the administration. He
felt that communities with sales tax had fared better in
money distribution than others and thought the formula
could be based on lost wages. He was concerned about the
idea that money could not be moved between communities
depending on the greatest need. He wondered where the money
was located before it was distributed. He felt that the 45
percent was a guide established by the administration and
wondered why the funds could not be shared, as they
originated from the same central bank.
9:56:52 AM
Ms. Fowler replied that the department could not change the
allocations arbitrarily without a process in place. She
believed there could be a discussion about the development
of such a mechanism. She stressed that conversations on the
matter had not taken place and there was very little
information that could be provided. She did not want to
imply there was zero flexibility to moving appropriations
once they had been made due to federal guidance.
Representative Wool believed flexibility would be
beneficial to communities. He noted that the previous day
the committee had heard from the chief of staff of the
mayor of Anchorage who had stated they believed Anchorage
could use the funds to backfill lost revenue. He asked who
would recover the money if required to pay it back to the
federal government.
Ms. Fowler replied that she did not yet have answers to the
question. She said that federal guidance received so far
indicated that the state would pay the federal government
and then the city would be liable to the state.
10:00:34 AM
Representative Wool asked when DCCED received the money and
distributed it in a tranche whether the funds went out in a
tranche or if communities had to make an official request
for every expenditure.
Ms. Fowler replied that there was one significant
difference between the way the department would be
administering the program compared to the way it
administered its other programs. She said that the intent
with the program was to give the three tranches to
communities; reporting would be required on how the money
was spent but, receipts would not need to be submitted for
the initial release of funds.
10:02:15 AM
Vice-Chair Ortiz asked about the methodology used to
allocate the $305 million, He understood that it could be
based on other revenue coming into municipalities.
Ms. Fowler answered that OMB used existing economic data
sources to capture what the economic impact of COVID-19
might be, she deferred any other questions on the
methodology to OMB.
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR (via teleconference), asked to hear
the question again.
Vice-Chair Ortiz complied. He queried what formula had been
used to distribute the $305 million. He asked whether
legislators could expect to receive a clear explanation of
how the funds would be dispersed.
Mr. Steininger answered there would be a clear explanation
on how the formula had been calculated. He said that OMB
had used information provided by DCCED about economic
activities in each community. He noted that technical
errors in the calculation had been identified and would be
corrected before additional information would be given.
Co-Chair Foster requested the information to be distributed
to committee members.
10:07:05 AM
Vice-Chair Ortiz noted his questions were not at all coming
from a concern about dollars that would go to his
community. The questions were in response to the concerns
of other communities.
Representative Tilton spoke about loans to businesses. She
wondered whether, through the process, there was an
expected administrative fee for the loans or grants. She
believed the goal was to get the most money out to
businesses.
Mr. Weitzner responded that the RFP that had been issued to
financial institutions had addressed the question. He said
that the intent was to reduce the cost to the borrower as
much as possible. He believed they would be able to achieve
a cost competitive program and benchmarked the program
against the programs offered on the federal level.
10:09:19 AM
Representative Tilton understood that for some programs
there was an administrative fee charged of approximately 5
percent.
Mr. Weitzner replied that the programs identified under the
CARES Act contained a wide scale of interest rates and
fees. He identified several programs and spoke to the
varying interest rates and fees. He relayed that under the
Emergency Loan and Guarantee Program the hope was to reduce
the cost to businesses as much as possible.
Representative Tilton referenced significant frustration
businesses were having with the process. She wondered what
AIDEA was hearing about the needs that were outside of
input from the banking industry.
Mr. Weitzner offered the timeline for the information as it
had been made available to small businesses. He stressed
that the information contained an email and a phone number
that businesses could use to submit questions to AIDEA. He
shared that the phone line rang to AIDEA and his phone
directly. He relayed that he could provide a listing of the
individuals he had spoken to directly.
10:14:33 AM
Commissioner Anderson added that DCCED had been taking
phone calls and emails daily about the concerns of small
businesses in the state. She said that the department had
conducted teleconferences and industry meetings concerning
the needs and economic services throughout Alaska. She
assured the committee that they were keenly aware of the
needs of small businesses, which was the reason the
department had worked with AIDEA and developed the small
business program. She noted that a loan forgiveness portion
of the program was currently under review by DOL.
Representative Tilton thanked the department for their
work. She expressed appreciation for what everyone was
doing to try to keep the economy going. She expressed
concern about small businesses being heard and getting
their needs met.
10:17:13 AM
Representative LeBon expounded on Representative Tilton's
questions. He recalled there had been a reference to an
Alaska bank taking the lead. He asked which bank would be
taking the lead on the loans for the program.
Mr. Weitzner replied that AIDEA had issued an RFP, the
financial institution had not yet been determined.
Representative LeBon understood that AIDEA was looking for
banks that wanted to participate, not necessarily a lead
bank.
Mr. Weitzner answered that an RFP had been issued to all of
Alaskas financial institutions and credit unions. He
related that discussions with parties that had responded
were still ongoing.
Representative LeBon noted that the details of the program
were still under development. He cited the rollout date of
April 9. He understood that, to date, no investment had
been made in any communities.
Mr. Weitzner responded that the roll out on April 9
included the AK SAFE program, which was separate from the
Emergency Loan and Guarantee Program. The latter program
would work with financial institutions to provide a
guarantee of additional funding to businesses under
existing loan agreements. He said that the Direct Lending
Program had yet to be fully defined. He said that the level
and terms of funding for the program had yet to be
determined.
10:20:50 AM
Representative LeBon recalled the percentage of guarantee
for the Emergency Loan and Guarantee Program was 100
percent. He asked whether AIDEA had the final say on loan
approval or would it be delegated the bank underwriting the
loan.
Mr. Weitzner answered that there was unfortunately a bit of
confusion about the programs. He explained that the AK SAFE
loans were subject to the lender to determine the full
terms of the loan. He stated that if the question had been
about the Direct Lending Program, which was a subprogram of
the Emergency Loan and Guarantee Program it would be a
direct loan, through financial institutions, to borrowers.
Representative LeBon interpreted a direct loan program to
mean that AIDEA was dealing directly with the small
business. He queried whether this was the case, or whether
banks were involved in both programs.
Mr. Weitzner answered that with the Direct Loan Program,
AIDEA was working with financial institutions to make loans
directly to small business. The AK SAFE program worked with
both borrower and lander to guarantee an additional tranche
under their current loan agreement.
10:24:10 AM
Co-Chair Johnston asked about community assistance. She
understood that there was an application process in place
for standard community assistance that would be submitted
by communities to the department for grants. She asked if
they were not on the list if they had not applied in the
past.
Commissioner Anderson answered the intent was for the
Division of Community and Regional Affairs send a
compliance agreement to communities, which would be sent
back to DCCED to trigger the release of the first tranche
of funds.
Co-Chair Johnston asked whether the department had the
capacity to quickly work with communities if the federal
guidance changed to enable communities to have the
flexibility to spend the funds without additional
liability.
Commissioner Anderson answered affirmatively. She
elaborated that Ms. Moller's team had reached out to
eligible communities to get banking information and other
to ensure they could quickly distribute the funds. The
department would also work with OMB. She stressed that it
was hard to predict what would happen if the federal
guidance changed.
10:27:47 AM
Co-Chair Johnston believed it was important to act as
quickly as possible, but without exposing communities to
liability. She asked whether the ADIEA board felt that it
had the capacity to ramp up to $1 billion.
Mr. Weitzner answered in the affirmative. He expounded that
the board had an element of leverage it was able to achieve
through a guaranteed program. He likened it to the way the
U.S. Treasury had identified and funded programs through
the CARES Act. He said that the direction from the board,
under the resolution that approved the program, was to
allocate enough reserves to support up to a $1 billion
program.
Co-Chair Johnston surmised the board had made the item a
priority with the knowledge that their fund balance had
many missions.
Mr. Weitzner responded that it had been directed as a
priority program for AIDEA. He said that allocation would
be based on the demand they would be seeing for the
program. He said that there were over 100 Alaska businesses
who were currently in touch with their lenders. He said
that the entire focus was on the Small Business
Administration P3 program and establishing those funds to
borrowers working with their existing lenders. He
understood that following that program the focus would be
on the AK SAFE program.
10:31:03 AM
Co-Chair Johnston asked whether the federal government had
reached out to lenders like AIDEA.
Mr. Weitzner answered that AIDEA was looking to establish
itself as an eligible lender under several U.S. Treasury
programs. He stated that the Main Street Lending program
was one treasury program that was a four-year lending
program for businesses that had up to 10,000 employees.
Funding under that program allowed for loans up to $25
million, subject to certain terms and conditions, which
would be 95 percent funded by the federal government. He
believed that that would give AIDEA the ability to leverage
federal funding under that program.
10:32:53 AM
Co-Chair Foster discussed they had seen pushback at the
national level for large companies receiving funds intended
for smaller businesses. He thought that at the end of the
day small businesses just wanted to get access to the
funds. He asked where someone could go to start the process
and get more information.
Commissioner Anderson answered there was a portal on the
DCCED website showing the different available programs and
direct links - the intent was a one-stop-shop.
Co-Chair Foster looked at slide 9, related to ensuring
equal access across urban and rural communities. He
discussed that in rural areas some individuals had no idea
where to start and sometimes there were issues with access
to the internet. He probed the issue of equal access across
urban and rural Alaska.
Commissioner Anderson replied it was a concern to her as
well. She shared that discussions had occurred with AIDEA
concerning internet access for small communities. She said
that the department would request a rural set-aside for
small communities. She said that the goal was to make the
program easy to access and to simplify the process.
10:37:13 AM
Co-Chair Foster noted there had been issues where funds had
been exhausted - it was his deep concern that information
would not be as readily available to rural communities.
Representative Wool noted that Los Angeles had announced it
was providing free testing to all residents. He asked
whether that could be done in Alaska.
Commissioner Anderson believed it was true as she read the
guidelines. She would defer to DHSS.
Ms. Fowler said she did not see why it would not be an
allowable expense.
Representative Wool noted it seemed a shame to send funds
back to the federal government if it could provide free
testing to residents. He asked about the $300 million for
small business relief. He noted that the investments
component of the department would handle the funding
allocated for investments. He wondered what that entailed.
Commissioner Anderson believed the intent was the current
division within DCCED that managed the small loan programs
was where the funds would be located.
10:41:07 AM
Representative Wool stated it was unclear how the $300
million related to investments.
Commissioner Anderson replied that the language had been
based on the original guidance received from the federal
government and the allocation would change because of
updated guidance. She would share the information when it
was received.
Representative Wool understood that the AK SAFE program
provided funding in addition to federal funding. He
surmised that the program was not for people who had been
denied any other loan, and any business affected by COVID-
19 could apply.
Mr. Weitzner replied in the affirmative. He believed that a
large amount of businesses in the state would be affected
by the virus.
Representative Wool noted that the loans were for small
business and nonprofits unable to obtain SBA, PPP, or EIDL,
or other federal support. He asked whether it pertained to
seasonal businesses.
Mr. Weitzner clarified they were trying to avoid businesses
that were already in the process, or had already received,
PPP funding. He stressed that the intent was to assist
small businesses and nonprofits that were unable to obtain
federal funds. He stated that the goal was to direct it to
parties without an existing bank relationship and not had
the ability to get their application approved by the SBA.
10:45:16 AM
Representative Wool noted there were numerous seasonal
small businesses in the state. He thought that even if
2,500 businesses applied it would be a lot of loan
processing work. He believed they would need at least one
financial institution and perhaps more to process the
loans. He wondered whether one of the programs should be
outsourced - especially the $300 million in small business
relief. He wondered whether the department would require
additional staff.
Commissioner Anderson clarified that the $300 million was
intended funding for existing programs. She reiterated that
AIDEA had issued an RFP to financial institutions to be the
entity that processes the AIDEA funded loans.
Representative Wool maintained that the department would
likely need additional staff to process the loans.
10:47:49 AM
Representative Knopp had been pleased by the information he
had heard from the department during the meeting. He
appreciated the scrutiny the department was giving to the
issue. He spoke to the essential nature of adhering to the
federal guidance. He wondered who would audit the criteria.
10:50:01 AM
Commissioner Anderson replied that the intent was for
communities to issue monthly reports to OMB. She believed
that OMB would review and validate the expenditures per
category. She said that she had no information regarding
the final federal audit.
Mr. Steininger did not have any further information on the
federal piece. He said that OMB would be consolidating
reports sent in by communities.
Representative Knopp asked about the reappropriation of
some of the funding that might not be fully spent in
specific communities. He thought that the allocation of the
funds was still an issue to committee members. He thought
the grant program and quarterly reporting justification
fixed much of the issue, because if a community could not
justify spending the funds it would not receive them. He
asked whether this was something OMB would address.
10:52:30 AM
Mr. Steininger responded that the primary priority was to
give communities a known amount of money up front, so they
knew what resources were available to them. He stated that
as monthly reports were generated, communities could have
less of a need than for what was allocated. He stressed
that it was difficult to say, right now, whether
communities would have money left over from the
allocations.
10:53:42 AM
Representative Carpenter looked at Slide 5 and allowable
expenditures, second to last bullet:
• Expenses associated with the provision of economic
support in connection with the COVID-19 public
health emergency.
Representative Carpenter queried the definition of
provision of economic support.
Ms. Fowler replied that there were three examples given in
the federal guidance: expenditures related to the provision
of grants to small businesses to reimburse the cost of
business interruption caused by required closures;
expenditures related to a state, territorial, local, or
tribal government payroll support program; and unemployment
insurance costs related to COVID-19 public health
emergency, if such costs would not be reimbursed by federal
government pursuant to the CARES Act or otherwise.
Representative Carpenter surmised the bullet pertained to
expenses associated with providing the economic support,
but not a payment protection plan of the state.
Ms. Fowler agreed.
10:55:40 AM
Representative Josephson referenced Representative
Carpenter's question. He thought it was where the municipal
city manager [Anchorage] read the guidelines broadly. He
thought there could be backfilling done with the funds
related to COVID.
Commissioner Anderson read the language similarly and
deferred to the Department of Law for clear guidance.
Representative Carpenter read the bullet and thought
economic support was not specifically sustaining
government, but for helping the people and businesses in
communities. He thought that someone else would have to
come up with the funds to provide the economic support. He
understood that the state would provide the economic
support to communities, but expenses for providing the
support would be covered. He believed that Congress
intended that the funds should go to communities and not to
government.
10:58:53 AM
Commissioner Anderson agreed there was significant
ambiguity in the guidance. She understood that the funding
mechanism was interned to funnel funds to small businesses.
Mr. Steininger agreed with the statements made by the
commissioner.
10:59:58 AM
Representative Josephson looked at the guideline and was
reminded that while he supported the RPL process, the
second bullet under paragraph 5 was the reason he supported
an active legislative role. He believed that there were
creative solutions that could be important in support of
the broader economic objectives.
11:01:40 AM
Co-Chair Johnston thanked the department for the
presentation. She appreciated the work by the department,
OMB, and the administration to get money to the communities
as quickly as possible. She appreciated that the entities
were working to address the confusion. She looked forward
to a continued dialogue between the parties to get the
funds out as quickly as possible.
ADJOURNMENT
11:03:07 AM
The meeting was adjourned at 11:03 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DCCED House Finance C.A.R.E.S Act presentation .pdf |
HFIN 5/1/2020 9:00:00 AM |
|
| HFIN 5.1.20 CARES response DCCED.pdf |
HFIN 5/1/2020 9:00:00 AM |
|
| DCCED response HFIN Community Economic Data 050720.pdf |
HFIN 5/1/2020 9:00:00 AM |