LISTEN: Can Alaska’s economy bounce back after COVID-19?

The streets of downtown Anchorage were uncharacteristically empty on Thursday, March 19, 2020. (Abbey Collins/Alaska Public Media)

Tens of thousands unemployed, nearly $2 billion in lost state GDP — these are the economic projections in a new report by the Institute of Social and Economic Research. ISER examined the negative effects of the COVID-19 virus on Alaska’s economy. How much will federal spending help Alaskan businesses and individuals? We’ll hear the forecasts from ISER and learn what help is available from the Small Business Administration on the next Talk of Alaska.

HOST: Lori Townsend


Lori Townsend: As quickly as this crisis is changing, it seems early to really understand how much damage will ultimately be done to Alaska’s economy. How did you go about calculating potential loss?

Mouhcine Guettabi: Yeah, that’s a good question. And I think it’s an important framing. We really don’t know the extent of the damage. But what I wanted to do was try to wrap my hands around what are the potential consequences from the closures and what will be economic damage potentially be. I relied on the national estimate of how many people will get laid off by sector. What are the sectors that are most vulnerable to some of the actions that have been undertaken by governments throughout the country? And so essentially I focused on leisure and hospitality, on retail and on transportation as the three most vulnerable sectors, and then I assume that each of those sectors is going to cut a portion of its workforce. The most impacted is leisure and hospitality, I assume that it’s going to lose 50% of its workforce over the short run, and then 20% in each of the retail and transportation sectors, just to try and start getting a sense of what are some of the ripple effects from these, if you will, first round losses. 

Clearly as this crisis continues, the losses may end up being smaller or larger, and also, we don’t really know how long some of these businesses will be able to hang on. A lot of businesses were trying to keep people on the payroll and see whether or not some of the relief is going to help them do so. And then we do know that, for example, a non-negligible number of individuals have yet to file for unemployment insurance. You quoted 14,000 people being out of work, in two weeks now there are more than 20,000 people in Alaska that have filed employment insurance. And in this upcoming week, we should see another 10,000 or so filed for unemployment insurance. So that’s just the big picture, if you will.

LT: The the report your report says that in the second quarter, the one that we’re now, the loss could mean a loss of state gross domestic product loss of nearly $2 billion And the report goes on to say if the disruption is not short lived, there could be another $2 billion in losses and maybe upwards of close to 50,000 lost jobs. What defines short lived in your scenario?

MG: It’s less about the number of days and more about the number of months. So the question is, how quickly is the economy reopened? What does this reopening potentially look like? I think that if we manage to contain the virus, which is obviously priority number one. All of this conversation should not be understood as the numbers are ugly, therefore we should open economic activity. I think the best thing for the economy in the long run is virus containment. But when I say the short run, I mean if we close the economy for two months, and then we gradually see economic activity start to ramp up, then many of the indirect or induced losses or these knock on effects will not happen because hopefully people will start spending money again, businesses will start reopening. 

But I want to make it clear A) the report is not a prediction, because it all hinges on how quickly the virus is contained. And then more importantly, we really don’t know even once the virus is contained, how quickly will we revert back to normalcy? Meaning, will households have enough money to spend again? Will businesses be able to get through these two or three months to actually survive and not file for bankruptcy and not exit? And then what will local governments look like? How quickly will they be able to start providing services again. There are considerably more questions than there are answers, but when I say short run  I’m assuming a couple of months of disruption as opposed to six months of disruption if you will.

LT: Alaska’s economy was already struggling. We’ve had a lot of battles over the budget over the last several years, and over the size of the permanent fund dividend, your report doesn’t include low oil prices as a factor. If oil drops below $20 per barrel — it’s in the high 20s right now — how would that change your numbers?

MG: I think everybody knows that Alaska is still an oil state. It’s still immensely dependent on oil and gas activity as you’ve correctly stated. Alaska went through three years of recession. We lost more than 11,000 jobs between 2015 and 2018. 2019 is when we turned the corner, but we were gaining jobs at a relatively slow pace, and a big portion of the quote-unquote recovery was due to the stabilization of oil prices. So a world where $20 oil price is the new normal will come with massive costs, there is no doubt about it. I think that the the picture that I’ve painted, and I think you were correct in saying that it’s a grim one, becomes considerably more difficult to deal with, because, as we all know, oil and gas employs a lot of people, it employs high income individuals, and it’s tied to many other sectors in the economy. 

So it really complicates both the fiscal picture and the economic picture. Alaska is being hit from a lot of different sides because [during] the tourism season, there is considerable uncertainty regarding what will happen whether it will happen or not. There is considerable uncertainty about local government revenues, there is considerable uncertainty about how the accommodation and food service sector will look like once we emerge from this. And then as you correctly point out, the linchpin or the cornerstone of the Alaska economy, which is oil, is being hit and hit really hard. And that’s going to affect investment in the future. It’s also gonna affect employment in the short run and clearly GDP.

LT: A story by Alaska Public Media’s Nat Herz found that we would still be in deficit next year even if there were no permanent fund dividend issued. Do you think the legislature should consider suspending the dividend next year especially? It’ll be especially hard for people because so many are out of work, but is that what may need to happen to protect the permanent fund going forward?

MG: That’s a really important question, and and I am of the opinion right now that because the economy is going to be struggling, and there is going to be a paucity of sources of spending from the private sector, that state government is going to have to intervene and is going to have to be fairly aggressive in spending money. And so I don’t know if that’s in the form of a dividend, or that’s in the form of grants to businesses or to local governments. But I think that we really need to think really hard about trying to replace some of the lost income by local government, some of the lost income by households, some of the lost income by small businesses. Austerity measures, in any form, are really not the way to go over the next six or 12 months, as difficult as that is, and I completely understand the short term versus the long term trade off, but we’re entering a period of severe economic contraction, and further reducing the dollars that flow in the economy can have really bad consequences.

LT: Jon, the SBA is sort of being seen as the rescue squad riding in to save the day right now. But how much can SBA really do to help stave off a deep recession?

Jon Bittner: With the passage of the CARES Act, the SBA actually got a significant infusion of capital that they can deploy either directly to businesses or through lenders. So they’ve got four main programs that they’re bringing to bear. One is the Economic Injury Disaster Loan, and that’s a direct loan from the federal government at a fixed rate over 30 years with a delayed first payment. There’s the Paycheck Protection Program, which just launched a few days ago, and that’s through SBA approved lenders, and that’s a loan that actually can be forgiven if you use it for certain qualifying expenses. And then there’s also a short-term, quick turnaround grant, they call it a loan advance but it’s a grant of up to $10,000 depending on how many people you employ.

LT: Help us understand the picture for small businesses. Do the majority of them have less than 100 employees, 50 employees? Help us understand what the picture is here.

JB: In Alaska the vast majority of businesses in the state have under 500 people, or 500 employees, and that’s sort of the cutoff for most industries to qualify as a small business through the SBA. I think it’s somewhere north of 99%. So basically, almost any business in Alaska really should be able to qualify for these, as well as nonprofits, actually. They’ve done something interesting where they’ve opened up many of these programs to 501(c)3s, 501(c)19s, which are veterans organizations, and I believe religious institutions as well.

LT: I have a question by email, John, that I want to put in front of you. This is from Florette. She says, “I am a sole proprietor of a DBA. I have filed unemployment benefits through the state and have been denied. How do I proceed to collect benefits under the care act?”

JB: I would recommend trying again. What I’ve heard is that on the federal level they’re still working out some of the details with the unemployment system and the changes they made in the CARES Act, and the guidance we’ve been given is to encourage people to try again.

LT: The SBA program opened on April 3, but not for independent contractors and self employed people; they can’t apply until April 10, and Alaska Department of Labor officials say it could be a month or longer before these folks can get funds because they have to stand up this new system. What can you tell us about why there was a delay initially, and especially for people who really may need operating cash sooner than other businesses?

JB: I fully understand there’s a lot of people out there that are pretty upset with some of the hiccups that have happened. The SBA loan site, there was some troubles there at the beginning, the programs haven’t rolled out quite as smoothly. I just encourage everyone to understand: what we’re going through right now is almost unprecedented in living memory. The SBA itself was never structured to handle an influx of literally every small business in the nation trying to receive help at the same time. 

They’ve got they’re doing — I genuinely believe this, I would say this, even if I wasn’t sort of a program with the SBA — they’re doing yeoman’s work and trying to stay ahead of a veritable tsunami of businesses that are all desperate for help. So what I can say for right now is there are several programs out there that are doing their best to try and deploy it on a state and federal level. Keep trying. If you are a sole proprietor or a business you can also look into some of the loan programs and the forgivable loan advance that I was talking about earlier as well, that’s up to $10,000 that you get if you apply for a EIDL loan. Even if you don’t get a loan, you’re still eligible for the loan advance.

LT: Mouhcine, economists are predicting a U shaped recovery. What does that mean?

MG: Think about it as the fact that we now are in recession or we’ll be entering a recession, and that, unlike what we were expecting initially. There was a lot of talk about what’s referred to as a V-shaped recovery, meaning you decline and then you bounce right back up. A U-shaped recovery is one where you decline and you stay at the bottom for a little while, and then you start gradually going up. It basically just means that rather than simply hitting the bottom or losing a ton of jobs, and then you reopen the economy and then people start spending and then economic activity just ramps up, that it’s going to take a little bit longer for everybody to basically revert back to pre COVID-19 spending habits and general economic activity. I think that that’s a more realistic assessment. 

I’ve said before economies are not like faucets, you can’t just open them and water starts flowing. Because again, as I’ve said, then I think the point that you and Jon were raised in a really important: some of these delays mean that people now are basically 2, 3, 4 weeks without a paycheck, which means that people are falling behind, which means that even when money does hit people’s bank accounts it’s going to take a little bit of time for them to get back to even. So even when the stimulus checks arrive and even when the booster employment insurance checks do arrive, people are going to be catching up which means that they’re not going to go back to spending in the same manner they were spending before, and a lot of businesses are falling behind as well. And so I think that we need to set realistic expectations about how quickly normalcy returns, whatever that means. 

LT: Well, as you said, the economy isn’t a faucet, you can’t just turn it back on. And so much of the economy is dependent on consumer confidence. There’s not much of that right now. When the virus is gone, and businesses can restart, how long do you think it will take for that confidence to really come back? I realize I’m sort of asking for your crystal ball answer here, but what are your thoughts about that?

MG: I think that’s an important question, and I think that gets me back to [why] one of the reasons why containing the virus is so, so important is because — I think from a public health perspective, obviously, that’s the most important thing — but I think from, from the perspective of long term economic health, that’s also incredibly important. Because I think that if we do a good job of testing of containing the virus that indeed will result in people starting to trust being in public places. That will affect their willingness to get back on cruises, or on planes, or book that next trip, and so how long it will take depends on how well we manage the public health portion of the issue. And also how well do we support people, businesses and local governments through this, right? 

I think it’s a two pronged approach: do as good of a job as possible in managing and containing the virus so that people can have enough confidence that being outside is okay and they’re not putting themselves or other people in danger. And then the other thing is being as aggressive as possible from a fiscal perspective to ensure that people remain as whole as possible, so that when they feel confident enough about their health and their neighbours health, they can actually resume normal activity. How long that lasts depends, again, on a lot of different things. I think the optimistic view is by mid summer we get back to normal activity. But like you said, I don’t have a crystal ball and I don’t think anybody really does.

LT: Let’s go back to the phones. Carl is in Cordova.

CALLER: I’m an independently employed artist, and I’d like to know what would be available in terms of this grant for small businesses. And you may have already answered the question, but if you give a little recap that’d be great.

JB: So for the EIDL and the PPP, self employed individuals, independent contractors, sole proprietors, and small businesses, as well as a few other organizations are all eligible. Carl, we would love to help you, that’s kind of what we do at the ASBDC. So if you reach out to us through the website,, one of our advisors would be happy to walk you through anything you need.

LT: Jon, there is going to be a lag just because of how many people are trying, and banks are trying to stand up this process so that they can assist in getting this money out to people, so it’s not going to happen in a couple of days. What are you hearing from businesses about how long they can stay viable with or before they get this assistance from SBA?

JB: We’ve been getting a lot of feedback from businesses and it’s sort of tied usually to their size, right? The smallest businesses were hit hardest, fastest, and they were saying they had a matter of days or weeks before they’d have to close their doors. The larger the business, usually, the more reserves they have, but all of them, even the anchor businesses that you’d be familiar with in your communities are saying this isn’t sustainable for longer than a few weeks to a month, depending on how they’re positioned. 

It’s particularly bad for the seasonal businesses. You look at the tourism industry, I mean, this is sort of the point where they were the most vulnerable. Right before the season starts you have to staff up, you have to prep all of your gear and things, and you sort of bank on the upcoming season to cover those outlying costs. As Mouhcine said, we’re not confident that that’s going to happen this year. The tourism season is probably going to be pushed back, and who knows when it’ll be restarted this summer, if at all. So, there’s a lot of angst out there, a lot of a lot of really worried business people, but we’re hoping that some of these programs, especially the PPP, will enable them to not only get through the next few months, but also to keep their people on the payroll and really try to get some cash back into those people’s pockets.

LT: Let’s go back to the phones for a moment. We’re going to hear from Jennifer in Anchorage. 

CALLER: I am having a heck of a time trying to figure out how to fill out the loans. I’m a sole proprietor, And it’s all new to me to do this. Everywhere I go: my accountant, Alaska USA — I talked to them this morning— my professional association, no one seems to know exactly the answers about how these loans are going to work. I’m scared to borrow money if I don’t understand how that’s gonna go. And the other half of my question is I keep hearing how imperative it is to move quickly on filling out the applications because there’s limited funding. So how, where can I go? And how quickly do I need to move?

JB: Again, I would highly recommend that you reach out to the ASBDC, not to self promote here, but that’s basically 99% of what we’ve been doing for the last few weeks. We’ve got some tutorials on our website if you don’t have time for one on one, [it] walks you through all the forums and we have some guidance on what you need to prepare before you submit your application. We’re happy to talk you through what we know about how these loans are structured, and what might be the best option for your business. 

The second part of your question, we’re hearing that a lot. There’s a lot of concern about the amount of money that’s available to these programs and whether that’s going to be enough. All I can tell you is if all the businesses that we think are going to apply for this choose to apply, and it seems like the volume is quite high, there won’t be enough money in the CARES Act to cover every penny. The good news on that front is there is a another bill moving its way through Congress that does appear to include about a half a trillion dollars worth of additional small business support funding. Like I said, it hasn’t passed yet, but I think that Congress is pretty motivated. They understand the problem and they understand that more money is needed. And hopefully that will boost the PPP program funding to the point where nobody gets left behind.

LT: Mouhcine, economist Robert Reich, former labor secretary under Clinton, he also served in two other Democratic administrations, yesterday he tweeted to House Speaker Nancy Pelosi. He said “I suggest your proposal for Coronavirus phase four be ready when Congress returns on April 20 and provide $1,000 per week for six months to families; 2) healthcare for six months; 3) three small business Payroll Protection for six months; and 4) no corporate bailouts.” Mouhcine he’s advocating for direct financial support for families. You’d mentioned that now is not the time for governments to put in austerity measures, that they should be spending money. Do you think some version of this would be the most effective for stopping the worst of the decline? Financial support for families to keep money cycling through what is still economically active for carry-out food and services, rent, mortgage, utilities, and to stand up the economic system faster when it can be restarted.

MG: Yeah, I think that that aggressive action is absolutely needed. I think that the $2 trillion package is a very good start, but I think that you’re right: having money in people’s pockets is extremely important, not because we expect them to go out and spend it, but because we know that people have bills, and have rent, and have mortgages, and we want to try to make sure that they remain as whole or as near whole as possible through this this ordeal. The other thing that’s really important, and Jon mentioned it a few times, and it’s incredibly important in terms of long term economic health, is the Paycheck Protection Plan that incentivizes businesses to keep people on the payroll for as long as possible, so that businesses actually survive the shutdown and that people have jobs to go back to. 

For me, [I think] we need to think about financial support to individuals, and that potentially means direct payments; we need to think about support to businesses so that they can try to get through this; and then the third piece that really has not been addressed directly by the federal package is support to local governments. Alaska is a case study here because we know that the Skagways and the Denalis generate a significant portion of their revenues from the tourism or the visiting industry, and they’re going to lose a big chunk of that, and that’s a problem that’s going to manifest itself over multiple month, and we really have not thought about it. The other thing we haven’t thought about a lot is businesses that are potentially starting to feel the pain now, but are going to get really devastated over the next five or six months. 

So we shouldn’t just think about financial support for the next month or two months, we need to have a little bit of a longer timeframe. Because even if the economy, for example, reopened in June, that still is going to mean that, for example, the tourism season is going to be five or 10 percent of what we would expect it to be, which means that the economy will quote unquote, be open, but a lot of businesses, a lot of governments are gonna be missing out on hundreds of millions of dollars. So I agree with the general premise. Yes, get money in people’s hands, try to save as many businesses as possible, and try not to think about this as a two month process. Try to ensure that you’re aggressive and you’ve got a longer timeframe in mind when structuring some of these packages.

LT: Let’s go back to the phones for a moment. Colin is in McCarthy.

CALLER: I am set to open a new business, a food truck here in McCarthy, and our season is from May to September. I’m just curious if there’s any protection for us. All the loans are based on past revenue. You know, I spent all my savings into this and was set to open and I feel like the forms for the SBA say that it’s based on past revenue, and I was curious.

JB: I can’t give a definitive answer without seeing sort of knowing more about your business, but I will tell you that really early stage businesses startups aren’t as well covered under these programs as existing businesses. And I think part of the reason for that is the focus when they passed this was really trying to protect and preserve as many existing jobs as possible. And so they were focused on small businesses or huge employment generators nationwide, and they’re really trying to maintain employment levels. In future bills, this has been identified as a bit of a gap. And so like I mentioned, there’s another relief bill that seems to be making its way through Congress. I suspect that this is one of the things that will be addressed in that bill as well.

LT: Jon, following up on that, someone like this that’s just starting out doesn’t have any income yet because they’ve invested, possibly, whatever money they’ve saved up or they have in the startup idea. All of a sudden, boom, we have this huge crash. Are there any avenues for them to maybe go to their local bank and say “Can I get some sort of a bridge loan that you can hold off on getting payments for the next couple of months?” Because if Congress takes up another bill, that’s not going to get passed immediately, and I think they’re not coming back until April 20. So if there’s not funding available for the next month or two, are there other ways that people that are just facing bankruptcy may be able to get some kind of bridge funding until they can access this SBA program?

JB: Absolutely. So a lot of it is going to be reducing your overhead, reducing your operating cost, reducing your expenses per month. Almost every lender we’ve heard from is actively working with their clients to structure payments to make things as friendly as possible. Nobody wants people to lose their business. Banks don’t want to foreclose on anybody right now, that’s not a good business model for them, so a lot of them are really actively working to try and make this work for people. Another option is to talk to your utility providers or insurance providers, things like that, anything that you’re having to pay out on a monthly basis. Most of them have a lot of friendly terms built into what they’re doing right now, so you can lower your operating costs significantly. 

You also might look into or keep an eye on what the state is planning on doing because they’re about to get, I believe it’s $1.2 billion from the CARES Act directly to the state. I’ve heard a lot of theories on what that money will be used for and what it can be used for, and I think that clarity that is coming out next week from [the U.S. Department of] Treasury, but there’s a lot of creative ways that the state can put that to use, and I know the governor’s team has been collecting a lot of feedback on that recently. I’m sure they’ll come with something that identifies the gaps they’ve heard of, and this sounds like one that has come up over and over again.

LT: Jon, I wanted to ask about nonprofits. They’re usually not involved with SBA, but the CARES act includes nonprofits for the first time in this type of stimulus package. What are some ways that nonprofits can utilize these funds? And are there any restrictions?

JB: One of the quickest ways is to try and take advantage of the Paycheck Protection Program. If you’re a 501(c)3 nonprofit with 500 or fewer employees, which is most of them within the state, you’re eligible for this as well as a few other nonprofits. It allows you to basically secure up to 250% of your average monthly payroll for the past year, up to $10 million total, and that if you utilize that for payroll, rent, utilities and mortgage interest payments, 100% of that loan can be forgiven if you spent it within the next two months. So that’s a good way to keep the doors open and keep the lights on and maintain operations. They’re also eligible for the $10,000 loan advance, you can’t see me but I’m making air quotes here, for the EIDL loan. When you apply for an EIDL loan, you can also say that you are interested in up to $10,000 advance, and that is free and clear if you get it. You don’t have to pay it back and it’s not predicated on your getting an EIDL loan.

LT: Let’s go back to the phones. Ron is in Fairbanks.

CALLER: All right. I had an infrastructure Question that’s more long term. Prior to this big crash in the economy, Alaska’s credit rating was sort of going downhill, And we really need to be building our infrastructure. I’m curious if your guests have any opinion about what will happen in terms of our long term infrastructure needs, and whether perhaps in the successive bills that are going to be coming out to help the economy, the state has a position in terms of really pushing for certain infrastructure projects that would totally help the state. We’ve got lots of needs, and I don’t know who’s going to take the lead on these things. 

JB: Mouhcine can step in and correct me if I’m wrong, but I’ve heard that another of the bills that Congress is working on currently is an infrastructure bill, and I know that the President has indicated that he is interested in that as well. It’s a good way to create a bunch of jobs really quickly, and I suspect it’s going to have a lot of support in Congress. I say that with a grain of salt, but I think right now everybody’s sort of on board with the fact that this is necessary, and the states do need a program like this and a bill like that passed.

MB: Yeah. I mean, the capital budget has been bare bones for multiple years because of the the fiscal stresses that the state has been undergoing. There is, by some estimates, a little more than $2 billion in deferred maintenance, and so capital spending is needed. The question becomes how much potential of that $1.25 billion that the state is getting from the federal government can be allocated in creative ways? My reading of the initial instructions is it’s fairly restrictive in how it can be used, but know that there are people that are trying to think about what it can and can’t be used for. 

So not to be that economist, but there are scarce dollars, both the ones that are coming from the federal government and the ones that are available at the state level. And the question is, and you asked it earlier, Lori, is what is the best use of the limited dollars? Again, I’m of the opinion that both the federal government and the state needs to be spending, and spending aggressively, but also that needs to be surgical, in that you need to be making sure that those dollars are going towards places that sustain businesses, help households, and potentially put Alaska on a strong footing going forward.

LT: Let’s go back to the phones. Norm is in Soldotna.

CALLER: I got a question about commercial fishing. I’ve heard so little about it on the news, and I can’t wrap my brain around the idea that all these processors and fishing captains are going to be able to, you know… How are they going to quarantine their crews and workers and processors for 14 days prior to a season starting? Cordova’s starting real soon, people in Bristol Bay need to start gearing up. What are the economist’s thoughts about that?

LT: Jon, you probably want to take a shot at that first. How can these commercial fishing businesses get support if it’s needed right now? And then Mouhcine, if you’re looking at some of the projections, please weigh in as well.

JB: I think that one of the one of the issues that has come up with the Paycheck Protection Program is that it ends in June currently, and so if you have to spend it within the two months after that it can be difficult for seasonal industries like tourism and commercial fishing to necessarily take advantage of it. So that is a bit of a problem, but its own problem. It’s something that I hope they’re going to fix over the near term. I would suggest that they look at an Economic Injury Disaster loan, that’s up to $2 million. You can defer the payment for up to a year, it’s a 30 year fixed rate 3.75 percent loan. It’s worth looking into if that’s what they need to keep going. As for the quarantine issue, I really don’t know. I’m not a health professional, so I think that somebody along those lines would probably be better to weigh in on that.

MG: Just to echo the same thing. I think the concern that I have — both tourism and commercial fishing fall in this boat — is that there are quite a few industries that will be affected long after some of these initial payment protections sunset. And we need to think about that really carefully, especially at the state level. And the state needs to be prepared to step in where there are gaps that are left by federal programs. I will defer to somebody else regarding the health and safety issues.

LT: Let’s go to an email question. This is from John Hunt in Haines. John says he has a sole proprietorship; it’s a one man, one tractor landscaping business in Haines. And he’s concerned about the upcoming season considering that most of his customers rely on tourism income, which could be zero. He says “I have not applied for unemployment funds, nor SBA funding yet, and wonder if that’s a mistake. Should I get in line?” Jon, what would you advise here?

JB: Here’s what we’re telling everyone: absolutely, you should get in line. Especially for the EIDL loan, you’re not forced to accept any of these loans if you are given them. So there’s a choice to be made once you’re once your application is accepted. There’s also the $10,000 advance that, if you’re eligible for, I would highly recommend taking. You don’t have to pay it back, it’s not a huge sum of money, but it will hopefully get you through the next few weeks or months, depending on your own operating costs. As for unemployment, that’s a little more complicated. There’s actually a really interesting sort of math going on and a lot of businesses on whether it makes more sense for their employees and their business to furlough them so that they can get the unemployment package that was passed in the CARES Act, or apply for the PPP and keep them on the payroll. That’s more of an accounting decision that my staff is happy to help you with, but it is a little more complicated because there’s tax credits as well and things along those lines.

LT: Larry sends an email in saying, “I am unclear on the difference between the PPP and EIDL with respect to forgiveness. PPP is forgiven if used for payroll, rent, utilities. Is any of the EIDL forgiven for payroll?”

JB: No, the EIDL is more of a traditional loan, none of it is forgiven. If you get the advance loan, that $10,000 is the only part that’s forgiven. The ideal is a 30 year fixed rate 3.75% for businesses, 2.75% for nonprofits. And you can defer your first payment, I believe, up to at least a year. So there’s a lag time before you have to start paying that back.

LT: Mouhcine, medical practices and hospitals are hard hit financially right now. That may seem sort of counterintuitive, in a way, but as we know, they’re making sure that they have capacity to be able to take on a surge. So there’s a lot of elective procedures that are being put on hold so that they can make sure that they can meet the test if and when that’s needed. How worrisome is that? They’re having such a hard time, healthcare was previously a bright spot in Alaska’s economy. 

MG: Healthcare was growing even in the midst of the depths of the recession, and I think that it’s important to think about this economic shock as not being siloed in those sectors that I mentioned at the beginning of the show, but essentially hitting every single sector, and healthcare is certainly one of those. All the dentist offices, all the physical therapy offices are closed, and those people are in just as much of a difficult time as the businesses that we’ve been discussing. 

I don’t think that there is any way right now to think about the healthcare industry as bypassing this crisis, or benefiting from it, or anything like that. I think that the reality is they’re encountering similar or even more pronounced difficulties than some of the other sectors. And again, this is where states and the federal government need to be creative about ensuring that they understand what the short term disruptions mean for the long run for provision of public goods as we move forward.

LT: Jon, are there different tracks for tribal businesses, or is it all the same? How will SBA work with tribes and Alaska Native corporations subsidiaries through this process?

JB: Tribal businesses are included in both the PPP and the EIDL loan programs, so there’s certain definitions that you can find on their site. They actually have a great tool on the SBA site where you can enter in your business information — it’s certain industry information — and they’ll tell you whether or not you’re eligible. It’s not all just size, sometimes if you have more than 500, but you’re under certain financial caps, you can still be eligible.

LT: And when you’re when you look at the CARES Act and what’s been made available to small business, Jon, how long do you think that these loans and grants will help them stay afloat? Is it a month? Is it two months? And what do you think will be needed next, or is missing currently, especially for Alaska? If you design this, this relief package for Alaska, how would it be different?

JB: I think we’re coming up on the point where we have to start looking a little further down the road, right? What’s coming in the summer? What’s coming next fall with all of the impacts with the oil price, with  seasonal industries, with tourism. That’s going to have a cumulative effect that may be more pronounced in Alaska than elsewhere, and we should really start putting our best minds to work on how do we stave that off. What can we do to really support these industries and get us through the next 12 to 18 months?  I’m not an economist like Mouhcine, but I think that that’s sort of the timeline that we really need to get us through to get back to some semblance of normal.

LT: Mouhcine, how likely do you think the scenarios that you’ve put forward in your report are, and what are you going to be looking toward for your next study and research? What are some areas of interest that you’ll be delving into in light of the pandemics effect on the economy?

MG: I estimated that there will be about 27,000 direct jobs that are lost over the next couple of months. As I said earlier, we’re already at a little more than 20,000 people filing unemployment insurance claims, and then this upcoming week my preliminary estimate is we’ll see another 10,000. So we’re already in that territory, meaning that over three weeks, we’ll have about 30,000 people on unemployment insurance. That’s a little less than 10% of the Alaska employment rate, just to give you a sense of that. Again, my analysis was not meant to be a prediction, but I think that we’re already in that neighborhood. And I think the longer this lasts, the more complicated it will become. 

The next steps really are twofold. One is I’m trying to understand how will the federal aid package soften the blow of some of these predictions. And then I’m trying to understand how vulnerable local governments are to disruption of tourism, of commercial fishing. And as Jon hinted at, kind of shifting the timeline from the next two months, to starting to think about the next six, 12 and 18 months. And so really, that’s that’s what I’m focused on. Like I said I do not want the conclusion from the grim picture to be that we should rush and reopen the economy, because I genuinely think that that’s the wrong approach both from a public health and also from an economic health [standpoint]. People are going to need to trust that they’re safe in order to go out, and they’re going to need to know that they can resume the operation of normal activities, and that will not happen until we completely contain the virus.


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LIVE Broadcast: Tuesday, Apr. 7, 2020 at 10:00 a.m. on APRN stations statewide.
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Lori Townsend is the news director and senior host for Alaska Public Media. You can send her program ideas for Talk of Alaska and Alaska Insight at or call 907-350-2058.

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