Legislature(2019 - 2020)Anch LIO Lg Conf Rm
07/14/2020 02:00 PM House LABOR & COMMERCE
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| Audio | Topic |
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| Start | |
| Ak Cares Grant Program | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
Anchorage, Alaska
July 14, 2020
2:01 p.m.
MEMBERS PRESENT
Representative Ivy Spohnholz, Chair
Representative Louise Stutes (via teleconference)
Representative Sara Hannan (via teleconference)
Representative Andi Story (via teleconference)
MEMBERS ABSENT
Representative Zack Fields
Representative Mel Gillis
Representative Sara Rasmussen
OTHER LEGISLATORS PRESENT
Representative Bryce Edgmon (via teleconference)
Representative Bart LeBon (via teleconference)
Representative Dan Ortiz (via teleconference)
Representative Geran Tarr (via teleconference)
COMMITTEE CALENDAR
AK CARES GRANT PROGRAM
HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JULIE ANDERSON, Commissioner
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified on the AK CARES grant program.
BILL MILKS, Assistant Attorney General
Civil Division
Labor and State Affairs Section
Department of Law
Juneau, Alaska
POSITION STATEMENT: Testified on the AK CARES grant program.
REPRESENTATIVE BART LEBON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions pertaining to the AK CARES
grant program.
REPRESENTATIVE DAN ORTIZ
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions pertaining to the AK CARES
grant program.
MEGAN WALLACE, Director
Division of Legal and Research Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Testified on the AK CARES grant program.
ALAN WEITZNER, Executive Director
Alaska Industrial Development and Export Authority
Anchorage, Alaska
POSITION STATEMENT: Testified on the AK CARES grant program.
JON BITTNER, Executive Director
Alaska Small Business Development Center
Juneau, Alaska
POSITION STATEMENT: Testified on the AK CARES grant program.
REPRESENTATIVE GERAN TARR
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions pertaining to the AK CARES
grant program.
REPRESENTATIVE BRYCE EDGMON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions pertaining to the AK CARES
grant program.
JULIE ESTEY
Greater Wasilla Chamber of Commerce
Wasilla, Alaska
POSITION STATEMENT: Testified on the AK CARES grant program.
REEPRESENTATIVE BART LEBON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions pertaining to the AK CARES
grant program.
JAMES WILEMAN, President & CEO
Credit Union 1
Anchorage, Alaska
POSITION STATEMENT: Testified on the AK CARES grant program.
VINCENT LANG, Commissioner
Alaska Department of Fish and Game
Anchorage, Alaska
POSITION STATEMENT: Testified on the AK CARES grant program.
JERRY MCCUNE
Cordova District Fishermen United
Cordova, Alaska
POSITION STATEMENT: Testified on the AK CARES grant program.
ACTION NARRATIVE
2:01:30 PM
CHAIR IVY SPOHNHOLZ called the House Labor and Commerce Standing
Committee meeting to order at 2:01 p.m. Representatives Story
(via teleconference) and Spohnholz were present at the call to
order. Representatives Hannan (via teleconference) and Stutes
(via teleconference) arrived as the meeting was in progress.
^AK CARES Grant Program
AK CARES Grant Program
2:02:52 PM
CHAIR SPOHNHOLZ announced that the only order of business would
be invited testimony on the AK CARES grant program.
CHAIR SPOHNHOLZ stated that people have expressed their concern
that the AK CARES funding is slow in coming, and not meeting the
needs of the small business community. She reported that as of
July 13, 2020, per Department of Commerce, Community & Economic
Development (DCCED), 2,226 applications had been received, of
which 273 have been approved. If all 2,226 submitted
applications were approved, funds would total $98 million,
leaving a significant amount of funding available. She added
that approximately $11,426,000, or 3.9 percent of total
available funds, has been disbursed into the community so far.
She explained that many applications have not been processed and
members of the business and fishing communities have expressed
interest in various changes to the program. Today's hearing,
she said, is designed to help the committee understand the
barriers to accessing the funds and what fixes, if any, are
needed to prevent unnecessary small business closures during
this difficult time. Lastly, she introduced the list of
testifiers.
2:06:40 PM
JULIE ANDERSON, Commissioner, Department of Commerce, Community
& Economic Development (DCCED), informed the committee that
DCCED presented revised program guidelines to the legislature on
June 17, 2020. She said the department will be implementing
changes to the program's eligibility criteria, which would make
businesses that received $5,000 or less in PPP/EIDL funds,
businesses that returned PPP/EIDL funds in excess of $5,000,
501(c)6 nonprofit organizations, and businesses that received
relief funds through municipal grant programs eligible for the
AK CARES grant program. She pointed out that "double dipping"
is not allowed, meaning that funding from two different programs
cannot fund the same set of business expenses. Additionally,
she said expanded eligibility criteria would include Alaska
limited entry permit holders, which are professional licenses
that allow fishermen to buy and sell fish without a traditional
business license. She noted that by granting permit holders
access to the AK CARES grant program, thousands of participants
will be allowed to access the $50 million allocated to the
fishing industry by the federal CARES Act. She stated that the
fishing industry is facing extreme hardships as they try to
adjust to COVID-19 restrictions. She said DCCED is concerned
about fulfilling their unmet needs.
2:11:19 PM
BILL MILKS, Assistant Attorney General, Civil Division, Labor
and State Affairs Section, Department of Law, said today, he
would provide the background to a court action that was recently
resolved. He explained that there was an injunction motion
filed against DCCED seeking to block a proposed change to the AK
CARES grant program. In a House Finance Committee hearing on
June 17, 2020, DCCED presented revised program guidelines, such
as permitting businesses that received less than $5,000 in
PPP/EIDL funds to participate. He explained that a lawsuit was
subsequently filed challenging the department's authority to
administer that change, resulting in a decision by the Superior
Court in Juneau on July 10, 2020, which denied the injunction
and permitted DCCED to go forward with revisions. According to
the court, DCCED has discretion to administer the small business
relief program, which allows the department to make reasonable
interpretations to the application of the program. He said the
details of the program were intended to be filled out later and
all eligibility criteria were not filled out in detail, which is
not unusual for programs administered by state departments. The
court concluded that the purpose of the program was to
distribute federal CARES Act funds to businesses and individuals
who suffered financial harm due to the COVID-19 public health
emergency; further, that there was no legitimate purpose for the
program to exclude businesses that received less than $5,000 in
PPP/EIDL funds from participating. He offered his belief that
the court was particularly influenced by the nature of the
pandemic, the efforts of both federal and state governments to
react and adjust accordingly, and descriptions from the
Legislative Budget and Audit (LB&A) committee.
2:18:12 PM
REPRESENTATIVE HANNAN questioned whether DCCED would address the
eligibility of 501(c)4 organizations for the AK CARES grant
program.
2:19:00 PM
COMMISSIONER ANDERSON offered her understanding that the 501(c)4
organizations utilize a significant portion of funds for
lobbying. She explained that per Treasury guidelines, funds
cannot be utilized for lobbying activities, which is why 501(c)4
organizations were originally excluded.
REPRESENTATIVE HANNAN asked Commissioner Anderson to define
"significant."
COMMISSIONER ANDERSON said to do so, further analysis with
Department of Law's (DOL's) assistance is required.
2:20:54 PM
REPRESENTATIVE STORY questioned whether business owners who have
a part-time business that supplements limited income would be
eligible for the program.
COMMISSIONER ANDERSON said in the process of getting the revised
program guidelines approved, that issue has not been addressed.
She noted that it could be considered in the future and deferred
to Mr. Milks.
2:22:39 PM
MR. MILKS explained that the particular revisions that DCCED
identified on June 17 are not the only adjustments to the
administration of the program that are possible. He added that
the Superior Court recognized that assessing changes to the
program would be an ongoing process that's constantly adjusting
for specific needs.
REPRESENTATIVE STORY urged DCCED to consider adding 501(c)4
nonprofit organizations and businesses that supplement limited
income to the eligibility criteria.
2:26:21 PM
CHAIR SPOHNHOLZ applauded the changes proposed by Commissioner
Anderson. Nonetheless, she pointed out that Mr. Milks described
Judge Philip Pallenberg's decisions as the ability for the
administration to make changes to the program as it sees fit in
order to respond to the need. She offered her understanding
that the court order denied a motion for a preliminary
injunction. She added that Judge Pallenberg alluded to what a
final decision might look like, but the decision was not a final
decision.
MR. MILKS in response to Chair Spohnholz, acknowledged that
Judge Pallenberg's order denied an injunction to block DCCED's
proposed changes. He confirmed that it was not a final decision
to the entire case. Nonetheless, he explained that one of the
factors to consider in an injunction action is whether the
plaintiff has a clear likelihood of success in bringing the
lawsuit. He said in this particular decision, the court
determined that there was not a clear likelihood of success by
the plaintiff in an effort to challenge the changes to the
program. He noted that the court decision clarified that
regarding the administration of the program, all the criteria
were not intended to be spelled out in detail in the RPL and
that eligibility standards could be clarified later by DCCED.
He said the court looked at whether there was a reasonable basis
for the adjustments consistent with the purpose of the program.
CHAIR SPOHNHOLZ agreed that Judge Pallenberg indicated that the
final decision would not rule in the plaintiff's favor. She
questioned whether submitting an updated RPL to the LB&A
committee would be an effective way to ensure a clear paper
trail outlining the proposed changes.
MR. MILK said he is comfortable that DCCED is within the
reasonable legal zone of administering the program. He noted
that most adjustments were announced on June 17, 2020. He
offered his belief that submitting an updated RPL would not be
necessary.
2:33:25 PM
REPRESENTATIVE BART LEBON, Alaska State Legislature, asked if a
501(c)6 nonprofit organization would be eligible for the AK
CARES grant program if it received $10,000 in EIDL funds.
COMMISSIONER ANDERSON said the $5,000 limit would prohibit that
organization from being eligible under current guidelines.
2:34:18 PM
REPRESENTATIVE DAN ORTIZ, Alaska State Legislature, sought to
clarify whether DCCED is willing to go forward with the change
that allows people with a Commercial Fisheries Entry Commission
(CFEC) permit to apply for relief funding from the AK CARES
grant program, which totals $290 million.
COMMISSIONER ANDERSON answered yes. She said if they meet the
other eligibility requirements, CFEC permit holders are eligible
for the AK CARES grant program.
2:36:29 PM
MEGAN WALLACE, Director, Division of Legal and Research
Services, Legislative Affairs Agency, stated that she has no
objection to the summary of Judge Pallenberg's decision provided
by Mr. Milks. She reiterated that the decision was issued on a
preliminary injunction motion, adding that the litigation will
continue to move forward unless the parties otherwise resolve
it. She noted that the matter could go to the Alaska Supreme
Court. She said there is no dispute that the legislature has
the power to make changes to the program. However, she
questioned whether the RPL process would be the appropriate
venue to make additional changes to the AK CARES program. She
explained that her concern is largely based on the "tortured"
litigation history with respect to passage of RPLs;
additionally, she said the statute that authorizes RPLs does not
contemplate the committee returning to approve or address RPLs
after they have been approved. She opined that if a decision is
made to use the RPL process, it would be at risk for further
litigation; however, if changes were made by law there would be
no legal issues.
2:41:40 PM
CHAIR SPOHNHOLZ questioned whether Judge Pallenberg intimated
that the final decision would end up in DCCED's favor, giving
the department the authority to make administrative changes that
were not originally identified in the initial RPL.
MS. WALLACE explained that Judge Pallenberg's decision was
limited to the eligibility criteria revisions that were proposed
before the court. She said Judge Pallenberg's decision gives
some guidance that DCCED in conjunction with DOL can use to
assess whether additional changes fit within that framework.
She reiterated that without a decision on the merits, the
plaintiffs could object to subsequent changes and continue to
fight the process. Nonetheless, she stated that Judge
Pallenberg's ruling in the Superior Court indicated that DCCED
should be afforded some flexibility.
2:45:20 PM
ALAN WEITZNER, Executive Director, Alaska Industrial Development
and Export Authority, noted that AIDEA recognizes the
applications are not being processed quickly enough. He said
AIDEA and DCCED have had several constructive discussions with
Credit Union 1 and other experienced financial institutions and
grant providers as an exchange of best practices on processing
grants. He stated that AIDEA, DCCED and Credit Union 1 are
working on implementing several ideas from those conversations
that will significantly improve the process. One such example,
he said, is changing the forms that people have submitted to
streamline information for the processors from Credit Union 1.
He explained that AIDEA is working on adopting a centralized
portal function for the AK CARES program with the expanded
eligibility criteria that was recently announced by DCCED.
CHAIR SPOHNHOLZ inquired about small businesses that hoped to be
eligible for the AK CARES grant program but received too much
funding from the PPP/EIDL to qualify. She asked for further
clarification on the process of returning those funds to the
federal government.
2:48:28 PM
COMMISSIONER ANDERSON said DCCED found it important to give
people that received just over $5,000 in PPP/EIDL funds the
opportunity to return excess funds, which would allow them to be
eligible for the program. She explained that the department
would require verification that the funds were returned along
with a revised application for the program in which the
applicant would certify what he or she used the $5,000 in
PPP/EIDL funds for to avoid claiming the same expenses to be
reimbursed by the AK CARES program.
CHAIR SPOHNHOLZ said one of the concerns is that there is not a
mechanism for small businesses and nonprofits to return funds to
the Small Business Administration (SBA). She asked if this is
true.
COMMISSIONER ANDERSON offered her understanding that there is a
simple process to return the funds.
CHAIR SPOHNHOLZ asked Mr. Bittner to describe the process for
small businesses to return the amount of funds over $5,000 to
make them eligible for the AK CARES grant program.
2:51:21 PM
JON BITTNER, Executive Director, Alaska Small Business
Development Center, explained that returning EIDL funds is a
simple process that involves writing a check and mailing it to
the SBA office in Colorado. He stated that returning PPP funds
is more complicated as there is no existing mechanism to return
them. However, he offered his understanding that people could
prepay the PPP loan back up to the amount in question.
CHAIR SPOHNHOLZ posited that people who repaid the PPP loan
would be risking the possibility of their application being
denied for the AK CARES grant program.
MR. BITTNER said yes, there is no certainty that returning the
funds would grant automatic eligibility.
2:53:20 PM
REPRESENTATIVE STORY questioned whether returning PPP funds is a
common practice in other states. She asked for the average
amount of PPP/EIDL funds being received.
MR. BITTNER said in Alaska, roughly 990 businesses received
$5,000 or less in PPP funds. He reported that the average EIDL
amount is $100,000 and the average PPP is slightly less, around
$60,000 to $70,000. He said he would follow up with the exact
numbers.
2:55:41 PM
REPRESENTATIVE STUTES noted that most people who received a PPP
loan are not in the position to return it. She opined that
excluding people who received PPP/EIDL funds is troubling and
urged AIDEA and DCCED to figure out a way to make them eligible,
even if it means deducting the amount received in PPP/EIDL funds
from the amount awarded by the AK CARES program.
COMMISSIONER ANDERSON said going forward, DCCED will consider
that as they continue to look for ways to improve the program
and meet the needs of applicants.
REPRESENTATIVE SPOHNHOLZ said economic development and business
experts have advocated for small businesses to have the
opportunity to use AK CARES funding to complement PPP/EIDL
funds, as the purpose of each program is different. She
suggested exploring ways to modify the AK CARES program further
to allow businesses that received funding over $5,000 to be
eligible.
2:58:05 PM
REPRESENTATIVE STORY questioned whether returning PPP funds is a
common practice in other states or if it's unique to Alaska.
COMMISSIONER ANDERSON said her team has researched how other
states are implementing relief programs and many of them have
chosen to distribute funds directly through those entities. She
added that the issue of returning SBA funds has not been
directly addressed.
CHAIR SPOHHOLZ inquired as to DCCED's process of engaging with
the business community to identify their concerns and feedback.
COMMISSIOENR ANDERSON explained that DCCED, AIDEA, and Credit
Union 1 are regularly involved in conversations with small
businesses, Alaska Regional Development Organization (ARDORs),
and economic development organizations. She said they need to
form a plan to communicate the revised program guidelines while
simultaneously listening to concerns from small businesses that
are not currently eligible.
CHAIR SPOHNHOLZ asked how communication is structured.
COMMISSIONER ANDERSON said primarily, engagement occurs through
bi-weekly meetings with economic development organizations and
weekly meetings with ARDORs. Additionally, she said there is
daily interaction with small businesses. She added that one of
the Alaska Development Team members also engages in regular
meetings with the fishing industry to understand their concerns.
3:03:20 PM
REPRESENTATIVE GERAN TARR, Alaska State Legislature, opined that
it may be too late to change the AK CARES grant program because
many businesses have already closed. She questioned whether
business closures are being tracked.
COMMISSIONER ANDERSON said she is not aware of a mechanism that
provides real time data on business closures.
CHAIR SPOHNHOLZ emphasized the importance of actively engaging
with ARDORs, small businesses, and economic development
organizations across the state to identify solutions as quickly
as possible. She said Alaska does not want to lose small
businesses that have contributed to the state's economic
vitality. She added that without real time data on business
closures, identifying pressure points through active outreach is
a necessity.
COMMISSIONER ANDERSON agreed.
3:06:04 PM
REPRESENTATIVE BRYCE EDGMON, Alaska State Legislature, asked
whether DCCED is confident that most, if not all, of the $290
million can be disbursed with the current structure in place.
COMMISSIONER offered her belief that with the recent program
revisions and current RFP process in place to bring more program
operators on board, the funds will be distributed.
REPRESENTATIVE EDGMON sought clarification on whether the
eligibility requirements need to be changed to disburse the
entire $290 million.
COMMISSIONER ANDERSON said DCCED is implementing revised program
guidelines and will continue to monitor the requirements and
identify areas in which the program can be modified within the
given parameters.
3:08:35 PM
REPRESENTATIVE EDGMON stated that he continues to hear
frustration from businesses that cannot comply with the $5,000
PPP/EIDL limit. He added that businesses do not have the
ability to pay their loans or grants back to get to that
threshold. He asserted that he is not confident in the ability
to disburse the full amount of funds.
COMMISSIONER ANDERSON acknowledged Representative Edgmon's
concern. She noted that the injunction motion delayed the
ability to administer the revised program guidelines in a timely
manner. She expressed her shared frustration, adding that the
department is trying to accomplish the process responsibly to
meet the intent of the program.
REPRESENTATIVE EDGMON emphasized that he does not want [the
program] to be in the same position in two weeks' time. He
reiterated his lack of confidence in the adequacy of the recent
program changes. He opined that a better job needs to be done
all around.
CHAIR SPOHNHOLZ asked if Commissioner Anderson has considered
lifting the cap on the amount of PPP/EIDL funds a business can
receive to be eligible for the AK CARES program. She opined
that $5,000 is an arbitrary number and the program could be
further streamlined by allowing some flexibility on that issue.
3:12:44 PM
COMMISSIONER ANDERSON recalled that constituents who were
recipients of PPP/EIDL loans of $5,000 or less had expressed
concern about their eligibility for the AK CARES program during
the RPL process. She said the $5,000 cap was established from
that feedback. However, she noted that as the program has
evolved, it is becoming clear that there are problems with
implementation and sufficiency. She added that DCCED is
considering amending the $5,000 cap.
3:13:47 PM
CHAIR SPOHNHOLZ reiterated that numerous economic development
experts have communicated that the $5,000 limit is arbitrary.
She emphasized the importance of providing support to small
businesses.
3:14:35 PM
JULIE ESTEY, Greater Wasilla Chamber of Commerce, said Wasilla
is the economic hub of the fastest growing area in Alaska. She
informed the committee that the Greater Wasilla Chamber Commerce
represents nearly 300 members primarily composed of small
businesses and nonprofits. She explained that Wasilla
businesses were hit by closures and restrictions in the spring
and although they are currently open, they are largely reporting
significantly less revenue. She stated that she looks forward
to the development of an efficient system for the AK CARES
program, which would allow the funding to reach people who need
it. She shared that the landscape of Wasilla's Main Street has
already shifted from the loss of a business that was a supporter
of numerous large nonprofits - especially at-risk youth. She
said in addition to the business and its employees, the
community will also be impacted by its closure. She noted that
many businesses were recovering from the earthquake when COVID-
19 hit. She explained that without reserves in place due to
earthquake-related losses, some businesses are closing their
doors indefinitely. Additionally, several large community
nonprofits are relying on PPP funds, which are quickly running
out. Other struggling businesses, she said, have received a
small amount of funding that excludes them from qualifying for
additional help. She commended Commissioner Anderson for
considering lifting the $5,000 threshold. She opined that with
the existing uncertainty, getting assistance and funding to
businesses as efficiently as possible "has been the one hope
that businesses have to keep going." She advocated for 501(c)6
nonprofit organizations, which includes the Greater Wasilla
Chamber of Commerce. She noted that the chamber has spent
countless hours compiling data and resources for its members,
connecting them with elected officials and bringing in speakers,
all without charge. Additionally, the chamber has been
providing data to community nonprofits to aid in their response
planning from business impact studies. She reported that the
chamber has lost one-quarter of its annual income with further
projected losses. Overall, she said, the chamber is projected to
lose about 50 percent of its annual revenue. She explained that
the chamber has cut back staff and expenses but lacks another
avenue of support and cannot responsibly take on loan debt;
therefore, access to the AK CARES funding would be a lifeline.
She expressed her support for the changes listed by Commissioner
Anderson, specifically expanding eligibility for 501(c)6
organizations and businesses that received any amount of
PPP/EIDL funding. She concluded by asserting that the need is
stark and very real for businesses in the Wasilla community.
3:22:44 PM
REEPRESENTATIVE BART LEBON, Alaska State Legislature, asked if
the Greater Wasilla Chamber of Commerce applied for EIDL funding
through the SBA.
MS. ESTEY said she does not know. She offered to follow up with
the requested information.
3:24:41 PM
MR. WEITZNER explained that AIDEA has been running a RP process
by initially engaging with Credit Union 1. After the
announcement for the AK CARES program, AIDEA initiated an
addendum to extend the existing RP program and look for
additional program operators. He indicated that AIDEA, DCCED
and Credit Union 1 see a benefit to having additional parties
that could provide their experience with other programs and
apply that information to streamline the AK CARES process. He
reported that constructive discussions have occurred with
experienced financial institutions about existing programs with
federal funding, as well as other grant providers, to understand
best practices for processing applications. He stated that
AIDEA is working on implementing their suggestions into Credit
Union 1's existing application base as well as the new
applications under the revised program guidelines. He noted
that establishing a centralized portal for new applications will
be critical for eliminating confusion about the required
information. He opined that developing a central portal would
help the processing time for program operators. Regarding the
status of the RFP, he said, it is currently outstanding;
however, AIDEA is in the process of engaging in conversations
with additional program operators.
3:28:08 PM
CHAIR SPOHNHOLZ recalled that the administrative fee is being
changed to entice more participants to administer the program.
She asked if that is true.
MR. WEITZNER explained that AIDEA has left the administrative
fee open to allow potential interested parties to respond with
their bid.
3:29:58 PM
JAMES WILEMAN, President/CEO, Credit Union 1, explained that
Credit Union 1 accepts the AK CARES program applications through
their portal, verifies the information, processes the grants,
and disburses the funds. He said it can be that simple;
however, the lag comes from verifying the supporting
documentation for eligible expenses. He explained that the
instructions call for items to be listed on the schedule with
supporting documents, such as a receipt or statement, to verify
the expense; staff must then sift through the information to
ensure that items are COVID-19 related. He said sometimes it's
clear and other times it requires back and forth communication
with the grantee, which adds significantly more time to the
processing time. He noted that improvements have been made,
including short videos that accompany each section of the
application process. He emphasized the importance of submitting
complete application packages and opined that a centralized
portal would help with that. He noted that Credit Union 1 has
reached out to applicants who have not responded, which makes it
difficult to disburse relief to them. He opined that onboarding
new operators for the program would quicken the distribution of
funds. He explained that Credit Union 1 has repurposed internal
staff and hired temps to add hours of additional processing
capability.
3:34:09 PM
CHAIR SPOHNHOLZ asked if throughout the process, Credit Union 1
has learned anything that has helped speed up the processing
time in recent days.
MR. WILEMAN stated that Credit Union 1 has done everything they
can on that front and is in the process of testing several new
forms that could help operators process the applications faster.
Overall, he said, it's difficult for business owners to put
together all the supporting documentation that's required, which
results in a "back and forth" with operators and a longer
processing time. He reiterated that Credit Union 1 has improved
from an internal standpoint. He explained that they are quick
to sort applications that cannot be processed and need to be
resubmitted from complete applications that can be processed as
quickly as possible.
CHAIR SPOHNHOLZ asked if the new forms are making a dramatic
difference in the amount of applications that can be processed
daily.
MR. WILEMAN said the new forms have only been tested with a
handful of applications; nonetheless, they should speed up the
processing time.
CHAIR SPOHNHOLZ pointed out that currently, only 12 percent of
submitted applications have been approved. Based on today's
testimony, she expressed doubt that there would be significant
acceleration in processed applications.
MR. WILEMAN reiterated that the new forms are encouraging and
speed up the application process; however, he pointed out that
it will take time to provide those forms to people who have
already applied. He said the biggest frustration is that many
applications are not complete enough to process. He added that
the possibility of bringing on an additional operator with a
centralized portal would be most helpful moving forward. He
said there is hope for optimism, but it will take time to
complete the RFP process to bring on a new operator and to get
new forms resubmitted by applicants.
3:39:17 PM
CHAIR SPOHNHOLZ asked how a portal would dramatically speed up
the time it takes to process applications.
MR. WEITZNER explained that providing new applications that are
easier to process would speed up the review process and
ultimately improve the turnover time. He added that a well-
designed portal would be the first interface that applicants
engage in and would help improve the processing time.
CHAIR SPOHNHOLZ questioned whether an online portal would
eliminate the need for paper applications.
3:45:01 PM
MR. WEITZNER answered yes. He said the purpose of the portal is
to ensure an innate database that provides applicants with
required fields to be filled out as opposed to paper forms that
may have be submitted incompletely, which leads to an extended
discussion between program operators and applicants. He
expressed his hope that implementing a portal would be the most
significant method to speed up the processing time. He added
that streamlining internal Credit Union 1 procedures by
implementing input from a broader group would also quicken the
review process.
CHAIR SPOHNHOLZ acknowledged the importance of streamlining the
process.
MR. WEITZNER noted that implementing best practices from
experienced organizations should help avoid the need to
restructure at a later stage. Regarding the RFP, he expressed
his hope that communicating the aforementioned changes to
interested parties would show that AIDEA is interested in
incorporating feedback from Credit Union 1 and is implementing
changes in a coordinated, collaborative process.
CHAIR SPOHNHOLZ inquired as to the timeline for the live portal.
MR. WEITZNER said he does not know.
CHAIR SPOHNHOLZ asked if there has been an RFP issue regarding
the creation of the portal.
MR. WEITZNER said AIDEA would issue an addendum to the existing
RFP; however, there have been conversations on whether to create
that portal internally within AIDEA or to incorporate a program
operator with an existing portal that can be used for
centralized processing.
REPRESENTATIVE STUTES noted that her office contacted DCCED and
Alaska Department of Fish & Game (ADF&G) about making CFEC
permit holders eligible for the AK CARES grant program in mid-
May. She expressed her hope that moving forward, quicker action
would be taken.
3:46:21 PM
REPRESENTATIVE STORY sought clarification on what is holding up
the process for people that already submitted applications.
MR. WILEMAN stated that the difficulty is widespread, ranging
from incorrect applications to incomplete eligible expense
schedules. Another common mistake, he said, is that applicants
forget to provide supporting documentation to verify that their
business expenses are COVID-19 related and within the timeframe
parameters of the program. He explained there is often a great
deal of back and forth to acquire missing information for
applications that are mostly complete. He added that Credit
Union 1's records show phone calls or emails sent to many
applicants who reportedly "haven't not heard back" from Credit
Union 1. He said Credit Union 1 is reliant on the applicant to
return their call or upload the required information. He stated
that Credit Union 1 makes every effort to complete the reviews
and process the grants.
3:49:55 PM
REPRESENTATIVE STORY asked if Credit Union 1 has considered
bringing people in to expedite the customer service process.
MR. WILEMAN said originally, no. He explained that the
necessary skills were deployed to the Credit Union 1 branch
staff; additionally, ARDORs held informational sessions for
businesses. He offered his belief that the application
checklist and informational videos have helped businesses
complete their applications. He said Credit Union staff 1 has
done everything they can in terms of customer service and
reiterated that they are reliant on applicants providing
complete applications.
REPRESENTATIVE LEBON said he spent several weeks with his former
banking employer and reported that most PPP applications were
submitted incompletely, which required follow-up conversations
to acquire additional information. He asked if Credit Union 1
is disbursing funds electronically.
3:52:52 PM
MR. WILEMAN said checks are being mailed via controlled
disbursements to grant applicants' unpaid bills, future
expenses, or to the grant applicant directly for reimbursement
of paid expenses.
REPRESENTATIVE LEBON surmised that all checks are being
disbursed by mail to vendors or applicants.
MR. WILEMAN confirmed that.
3:53:25 PM
REPRESENTATIVE STORY speculated that transferring the funds
electronically would streamline the process. She asked why the
checks are being disbursed by mail.
MR. WILEMAN explained that Credit Union 1 is mailing the checks
to ensure an appropriate paper trail for potential future
audits. He noted that Credit Union 1 was instructed to do so.
CHAIR SPOHNHOLZ sought to clarify whether the instructions were
included in the AIDEA contract.
MR. WILEMAN answered yes. He said Credit Union 1 has not been
receiving negative feedback about the method of disbursement.
3:55:12 PM
MR. WILEMAN in closing, indicated that Credit Union 1 would
continue to improve on disbursing the grants as quickly as
possible.
3:56:47 PM
VINCENT LANG, Commissioner, Alaska Department of Fish and Game,
explained that the federal CARES Act provided $300 million for
nationwide fishery relief, of which ADF&G believed it would
receive a large percentage based on the proportional landings of
Alaska. However, when the money was awarded, each state was
capped at $50 million. Subsequently, he said, ADF&G submitted
an RPL to gain control of the distribution of those funds
through DCCED. Instead, the $50 million was distributed via the
[Regional Fishery Management Councils], which nullified the need
for the RPL. He continued to explain that there are five
eligible groups competing for the $50 million awarded to Alaska,
including the processing sector, the charter and lodge industry,
the aquaculture industry, commercial fishermen, and subsistence
users. He said currently, ADF&G has been discussing eligibility
criteria with National Marine Fisheries Service (NMFS) and the
individual groups to establish a plan for the funds. He
indicated that ADF&G is consciously taking a deliberate approach
to avoid pulling fishermen out of the water to submit
applications during a critical part of their season.
4:02:06 PM
REPRESENTATIVE STUTES questioned whether Pacific States Marine
Fisheries Commission (PSMFC) is involved.
COMMISSIONER LANG confirmed that.
4:02:45 PM
REPRESENTATIVE ORTIZ sought clarification on whether the
processing sector is eligible for funding from the $50 million.
COMMISSIONER LANG offered his understanding that processors are
eligible.
CHAIR SPOHNHOLZ inquired as to a reasonable timeframe in which
the fishing industry could expect relief checks to be disbursed.
COMMISSIONER LANG said ADF&G is aiming to get a plan approved by
NMFS by the end of September to allow the disbursement of checks
by the end of the calendar year. He reiterated his reluctance
to pull fishermen away from their work to complete applications.
He said the relief checks could be small compared to the income
they could make from fishing.
CHAIR SPOHNHOLZ commended that.
4:05:40 PM
REPRESENTATIVE STUTES asked to what degree PSMFC is involved;
also, for the deadline that the funds must be distributed by.
COMMISSIONER LANG offered his belief that the deadline is the
end of the 2021 calendar year. He indicated that ADF&G would
provide PSMFC with a clear spending plan that allows them to cut
checks for eligible candidates.
REPRESENTATIVE STUTES shared her understanding that the deadline
is September 2021.
4:07:47 PM
REPRESENTATIVE STUTES asked whether receiving funds from the $50
million would make recipients ineligible for the AK CARES grant
program.
COMMISSIONER LANG offered his understanding that it would not
make applicants ineligible; however, they "can't be made more
than complete in their losses by the different aspects of the
CARES Act."
REPRESENTATIVE STUTES surmised that if an applicant applied for
the CARES Act it would be considered when applying for the $50
million.
COMMISSIONER LANG said, "they can't be made more than whole, and
NMFS will take that into account through the application
process."
REPRESENTATIVE STUTES questioned whether it's exclusionary.
COMMISSIONER LANG offered his belief that it is not.
4:09:07 PM
JERRY MCCUNE, Cordova District Fishermen United, explained that
before fishermen start a season, they must spend between $5,000
and $6,000 for expenses such as insurance, boat maintenance, and
storage. He noted that some Alaskan fisheries haven't opened
while others are almost closed; therefore, fishermen will need
help. He stated that COVID-19 has created low prices and poor
markets. The processors, he said, have spent millions in
response to the pandemic, which also adds to low prices. He
expressed frustration with the amount of time PSMFC has taken to
allocate money in the past. He expressed appreciation for the
expanded eligibility requirements, which will allow fishermen to
use a CFEC permit in lieu of an Alaska business license. He
expressed support for making fishermen that received any amount
of PPP/EIDL funds and 501(c)5 organizations eligible for the AK
CARES program.
4:17:03 PM
MR. BITTNER reported that nationally, the average for PPP loans
is $105,000 and the EIDL loan average is $65,000. In Alaska,
the average PPP loan is $112,000 and the average EIDL loan is
$65,000. He added that the average national EIDL advance is
$3,300 and in Alaska, it's $3,100. Overall, he said the SBA has
made just over $4.9 million in PPP loans since the program's
inception. There is over $130 billion left and the program has
been extended for several months longer. He said 11,201 Alaskan
companies have received a PPP loan to date, totaling $1.26
billion. He noted that several changes were made the PPP, one
which allows commercial fishing employees to count towards the
total amount awarded in PPP. He reported that nationally, the
industries that have received the most money to date are
healthcare/social assistance, professional scientific and
technical services, construction, manufacturing, and
accommodation/food service. In Alaska, the highest awarded
industries are healthcare, construction, other services,
accommodation/food services, and professional scientific and
technical services. He stated that 5,780 EIDL loans were
awarded to Alaskans totaling $358 million. Additionally, 9,376
Alaskans received EIDL grants totaling $31 million. Overall,
almost 30,000 individual transactions came through those
programs totaling over one billion.
4:21:58 PM
MR. BITTNER continued to explain that difficulty exists because
no one funding source can solve all the problems for businesses
in Alaska. He said the situation is dire. The tourism season
is nonexistent, and locals cannot replace the revenue made from
the usual 2.2 million visitors. He stated that the oil industry
is experiencing a slight rebound; however, the price remains
well below last year's, which has a ripple effect on secondary
industries across the state. Restaurants are also having a
rough time, as are most other industries. He noted that the
healthcare industry is rebounding, most likely resulting from
the easing of restrictions on elective surgeries. He reported
that a significant number of Alaskans are still on unemployment
and a significant number of Alaskan businesses - 37.9 percent -
are closed. Furthermore, conservative estimates suggest that
the economic impact in Alaska will last for one to two years.
He highlighted an increase in community support of businesses
and support from financial institutions and anchor industries.
4:27:04 PM
REPRESENTATIVE STUTES asked for clarification on whether $130
billion is left in the PPP.
MR. BITTNER said yes, there is a large amount of money left in
the program. He added that based on the burn rate over the last
several weeks, nothing suggests that the money will run out any
time soon.
REPRESENTATIVE STUTES asked when fishermen can apply for the AK
CARES program with a CFEC permit in lieu of a business license.
COMMISSIONER ANDERSON said DCCED is finalizing the revised
program requirements and RFP process. She said it should be
available to fishermen in the next two to three weeks.
REPRESENTATIVE STUTES asked if Commissioner Anderson would
notify Chair Spohnholz when a definitive date becomes available.
COMMISSIONER ANDERSON confirmed that.
4:29:10 PM
CHAIR SPOHNHOLZ encouraged everyone to read the UAA Center for
Economic Development's analysis of the PPP. She emphasized that
each program is designed to pay for different expenses and that
different kinds of businesses are eligible for each one. She
reiterated that businesses that received $5,000 or less in
PPP/EIDL funds are currently eligible for the AK CARES program;
additionally, that DCCED would explore further eligibility
expansions. She expressed concern that 34 percent of Alaskan
businesses are currently closed and emphasized the importance of
protecting the small business community to keep Alaskans
working.
4:32:53 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:32 p.m.
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