Legislature(2005 - 2006)

04/22/2005 02:48 PM House FIN


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HOUSE BILL NO. 7                                                                                                              
                                                                                                                                
     An Act relating to the calculation and payment of                                                                          
     unemployment compensation benefits; and providing for                                                                      
     an effective date.                                                                                                         
                                                                                                                                
REPRESENTATIVE  HARRY  CRAWFORD,  SPONSOR,  stated  that HB  7                                                                  
would increase  the maximum  weekly benefit available  through                                                                  
unemployment insurance from $248 to $336.                                                                                       
                                                                                                                                
Alaska's  current  benefits  fall short  in  helping  families                                                                  
cover  living   expenses  during   periods  of   unemployment.                                                                  
Alaska's  maximum  weekly unemployment  insurance  benefit  of                                                                  
$248  is the  fourth lowest  in the  nation.   Increasing  the                                                                  
maximum weekly  benefit is not  only overdue, it is  essential                                                                  
in alleviating  skill  shortages by  ensuring Alaskan  workers                                                                  
and their families survive periods of unemployment.                                                                             
                                                                                                                                
Representative   Crawford  added   that  the  average   weekly                                                                  
benefit  amount  of  $248  dollars is  only  35%  of  Alaska's                                                                  
average  weekly  wage,  the third  lowest  percentage  in  the                                                                  
country.   Other  western   states  provide   a  much   higher                                                                  
percentage  of  average  weekly  earnings   in  their  maximum                                                                  
weekly  benefit amount:  Washington-67%;  Hawaii-66%;  Oregon-                                                                  
63%;  and  Idaho-59%.     Retaining  a  well-trained   Alaskan                                                                  
workforce  is essential  for a  strong  economy. Providing  an                                                                  
overdue  increase in the  weekly benefit  amount is  necessary                                                                  
to keep Alaska's  workers in Alaska.   Linking the  method for                                                                  
future benefit  calculations to  average weekly earnings  will                                                                  
ensure any changes are in concert with Alaska's economy.                                                                        
                                                                                                                                
4:53:35 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Stoltze  asked  if  Alaska  had  a  provision  for                                                                  
family  members.  Representative  Crawford  replied the  State                                                                  
does and  that it  is in the  amount of  $24 dollars per  week                                                                  
per  dependant  up to  three dependants.    That  has been  in                                                                  
structure since  the beginning of Alaska employment  law here.                                                                  
                                                                                                                                
4:54:36 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Stoltze  asked  if  the  statistical  size  of  an                                                                  
average  family  had  been  factored   into  that  number  and                                                                  
compared  to  the  other  states.    Representative   Crawford                                                                  
replied  there  were higher  wages  paid in  Alaska,  however,                                                                  
that has been ameliorated over the years.                                                                                       
                                                                                                                                
4:56:27 PM                                                                                                                    
                                                                                                                                
Representative  Holm referred  to the costs  to the  employers                                                                  
at  $64   dollars  per  employee   per  year.   Representative                                                                  
Crawford  explained that it  would be  spread over five  years                                                                  
and  would amount  to  an increment  of  $10 for  five  years.                                                                  
Those calculations  were based on numbers from  the Department                                                                  
of Labor  and Workforce  Development;  a determination  needed                                                                  
to keep the Unemployment Insurance (UI) Trust Fund intact.                                                                      
                                                                                                                                
4:58:36 PM                                                                                                                    
                                                                                                                                
WAYNE STEVENS,  PRESIDENT, ALASKA  STATE CHAMBER OF  COMMERCE,                                                                  
stated that the  Alaska State Chamber of Commerce  understands                                                                  
the need to raise  the benefits paid through the  unemployment                                                                  
insurance  program.  The  State Chamber  understands that  the                                                                  
Unemployment  Insurance (UI)  benefit payments  are second  to                                                                  
the lowest  in the nation.   However,  the additional  cost to                                                                  
business, combined  with the rapidly  rising costs  of Workers                                                                  
Compensation  Insurance  and  the  ever  escalating  costs  of                                                                  
health  care  insurance   for  employees,  together   make  it                                                                  
extremely difficult  for businesses to survive  without making                                                                  
dramatic cuts  to employee costs.   After a cursory  review of                                                                  
the UI  program, it appears  that the  costs of providing  the                                                                  
new level  of benefits envisioned  in HB 7 is estimated  to be                                                                  
$12.4  million  dollars  annually.   In  calendar  year  2004,                                                                  
Alaska   paid   a  total   of   $135.7  million   dollars   in                                                                  
Unemployment Insurance benefits.                                                                                                
                                                                                                                                
Mr.  Stevens  suggested   that  business  could   support  the                                                                  
increase  in UI  benefits if  there were  adjustments made  in                                                                  
other areas  of the program  that would  make the cost  of the                                                                  
increases,  revenue neutral  to business.   Alaska  is one  of                                                                  
very  few  states  that  allow  a  worker   to  separate  from                                                                  
employment  without  good  cause  and then  after  a  six-week                                                                  
disqualification  period,  is  able  to  collect  unemployment                                                                  
insurance.    Alaska is  also  one of  a  few states,  to  pay                                                                  
dependent   benefits.    Currently,   a  claimant   may  claim                                                                  
dependants'  allowance of $24 per  child up to 3 children  per                                                                  
week  in  addition  to the  base  benefit.    The  dependants'                                                                  
allowance cost  the program, totaled $12.8 million  dollars in                                                                  
2004.   To  neutralize  the increased  cost  to business,  the                                                                  
State  Chamber  encourages  extending  the separation-waiting                                                                   
period to  12 weeks.   Another option  would be to delete  the                                                                  
dependent benefit.   The changes  would pay for the  increased                                                                  
UI  benefits   without  adding   to  the  already   escalating                                                                  
insurance and workers compensation cost affecting business.                                                                     
                                                                                                                                
5:02:14 PM                                                                                                                    
                                                                                                                                
BILL  KRAMER,  CHIEF,  UNEMPLOYMENT   INSURANCE,  DIVISION  OF                                                                  
EMPLOYMENT   SECURITY,   ALASKA   DEPARTMENT   OF  LABOR   AND                                                                  
WORKFORCE  DEVELOPMENT,  responded to  queries  by Vice  Chair                                                                  
Stoltze regarding  the child benefit.  If the  State takes the                                                                  
$12.8 million  dollars  paid in dependence  allowance  in 2004                                                                  
and  divided  it equally  amongst  all  weeks paid,  it  would                                                                  
increase the  average weekly payment  by $18.73.   The maximum                                                                  
benefit  amount  without  the  allowance   factored  in  shows                                                                  
                  th                                                                                                            
Alaska ranking  48  compared to  the other states.   Including                                                                  
                                             nd                                                                                 
the dependence allowance places Alaska at 42.                                                                                   
                                                                                                                                
Representative  Holm asked  if it was  intended to change  the                                                                  
percentage paid amount.                                                                                                         
                                                                                                                                
PATRICK  SHIER, ACTING  DEPUTY DIRECTOR,  EMPLOYMENT  SECURITY                                                                  
TAX, DIVISION  OF EMPLOYMENT  SECURITY,  ALASKA DEPARTMENT  OF                                                                  
LABOR AND WORKFORCE  DEVELOPMENT, noted that the  federal rate                                                                  
was in excess  of 6% percent  against which Alaskan  employers                                                                  
enjoy a credit  of almost 100%.  The average employer  rate is                                                                  
around  3%  percent.    In 2006,  the  average  rate  for  the                                                                  
employer  portion   moved  to  2.08%;  in  Alaska,   employees                                                                  
contribute  ½  of 1%.    The  State  would be  looking  at  an                                                                  
increase  of  slightly   over  10%  over  six   years.    Some                                                                  
employers  will see  their rate  staying lower.   An  employer                                                                  
that has  fluctuations in their  payroll might see  their rate                                                                  
increase beyond that percentage.                                                                                                
                                                                                                                                
5:09:27 PM                                                                                                                    
                                                                                                                                
Representative  Holm  worried  about the  adverse  effect  for                                                                  
those employers with seasonal employees.                                                                                        
                                                                                                                                
Mr.  Shier advised  that  the employers  with  a lowest  level                                                                  
would see  less of a  rate increase that  those at the  higher                                                                  
end.   The decline  of payroll  from one  quarter to the  next                                                                  
drives  the higher rate  from one  quarter to  the next.   For                                                                  
those  employers  that  do not  have  that  experience,  their                                                                  
increase  would be real  from 1% percent  to 1.05% percent  in                                                                  
the out years up until 2012.                                                                                                    
                                                                                                                                
5:10:57 PM                                                                                                                    
                                                                                                                                
Co-Chair  Chenault  MOVED to  ADOPT Amendment  #1.   (Copy  on                                                                  
File).    Vice-Chair  Stoltze  OBJECTED  for  the  purpose  of                                                                  
discussion.                                                                                                                     
                                                                                                                                
Mr. Stevens  spoke to  the amendment.   He explained  that the                                                                  
cost of  the program portion  that allows  people to  quit for                                                                  
no reason  or be fired with  cause, waiting period  be changed                                                                  
from 6  to 12  weeks.  He  emphasized that  might balance  the                                                                  
cost of the program.                                                                                                            
                                                                                                                                
5:13:14 PM                                                                                                                    
                                                                                                                                
Representative  Crawford  spoke  against  the amendment.    He                                                                  
explained that  the average amount of time for  a person to be                                                                  
unemployed in the  State of Alaska is 11 weeks.   He concluded                                                                  
that  the  average   person  would  never  collect   a  check.                                                                  
Workers would  be squeezed to the  point where they  would not                                                                  
remain in  the State.   He believed  that Alaska business  has                                                                  
been  given   a  break   over  the   past  years,  since   the                                                                  
unemployment  rates have  not increased.   The average  weekly                                                                  
benefit  paid out  with  the dependents  is  $194.04,  placing                                                                  
             th                                                                                                                 
Alaska in  49  position  nationwide.   He maintained that  the                                                                  
amendment would  create incentives  for firing employees  when                                                                  
work becomes slack.  He spoke against the amendment.                                                                            
                                                                                                                                
5:17:07 PM                                                                                                                    
                                                                                                                                
Mr. Shier  clarified that  the affect  of the amendment  would                                                                  
increase  the   period  from  6  weeks  to  12   weeks.    The                                                                  
Department  of Labor and Workforce  Development would  support                                                                  
the bill  with the amendment  as it would  reduce the  cost of                                                                  
unemployment  insurance  for  employers  and would  raise  the                                                                  
dollar amount of the weekly benefit to help employees.                                                                          
                                                                                                                                
5:19:14 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Stoltze inquired  if "discharged  for  misconduct"                                                                  
meant  more than being  fired.   Mr. Kramer  advised that  the                                                                  
language  of  the  amendment  duplicates  current  statute  in                                                                  
regard to that provision.                                                                                                       
                                                                                                                                
Vice-Chair   Stoltze  wondered   if   the  legislation   would                                                                  
encourage firing  employees, asking if legal protections  were                                                                  
in place to prevent such action.                                                                                                
                                                                                                                                
5:21:25 PM                                                                                                                    
                                                                                                                                
Mr.  Shier responded  that there  have  been many  discussions                                                                  
regarding that  issue.  There is a process to  allow employees                                                                  
to  challenge a  decision  on their  employment  status.   Mr.                                                                  
Shier noted that  the Appeal Tribunal would render  a decision                                                                  
based on the facts.                                                                                                             
                                                                                                                                
5:23:36 PM                                                                                                                    
                                                                                                                                
Representative  Croft  stated that  the  amendment  undermines                                                                  
the purpose of  the program.  There are many reasons  to leave                                                                  
a job.                                                                                                                          
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:       Holm, Kelly, Moses, Chenault                                                                                    
OPPOSED:        Croft, Joule, Stoltze                                                                                           
                                                                                                                                
Representatives  Foster, Hawker,  Meyer were  absent from  the                                                                  
vote.                                                                                                                           
                                                                                                                                
The MOTION FAILED (4-3).                                                                                                        
                                                                                                                                
5:26:38 PM                                                                                                                    
                                                                                                                                
Representative  Kelly requested to amend Amendment  #2.  (Copy                                                                  
on File).   The  change would be  to Page  6, Line 23,  insert                                                                  
"$33,250" and delete "$33,000".                                                                                                 
                                                                                                                                
Representative  Kelly  MOVED to  ADOPT the  amended  Amendment                                                                  
#2.  Co-Chair Chenault OBJECTED for discussion purposes.                                                                        
                                                                                                                                
Representative  Kelly  explained   that  the  amendment  would                                                                  
adjust the  bill to reflect a  weekly ceiling to $300  dollars                                                                  
rather than the proposed $336 dollars.                                                                                          
                                                                                                                                
Representative  Croft questioned  if  additional changes  were                                                                  
needed.   Mr. Shier  indicated that  Amendment #2 would  place                                                                  
         th                                                                                                                     
Alaska 35 nationally.                                                                                                           
                                                                                                                                
5:31:44 PM                                                                                                                    
                                                                                                                                
Representative  Crawford  stated his  intent  was to  increase                                                                  
the  amount of  unemployment  received  as much  as  possible.                                                                  
Co-Chair  Chenault WITHDREW  his  OBJECTION.   There being  NO                                                                  
further OBJECTIONS, Amendment #2 was adopted.                                                                                   
                                                                                                                                
Representative  Hawker MOVED  to REPORT  CSHB  7 (FIN) out  of                                                                  
Committee  with   individual  recommendations   and  with  the                                                                  
accompanying   revised   fiscal  notes.      There  being   NO                                                                  
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
CS HB 7 (FIN) was  reported out of Committee with  a "do pass"                                                                  
recommendation  and  with  a new  note  by the  Department  of                                                                  
Administration,  a new zero note by the Department  of Labor &                                                                  
Workforce  Development and  fiscal note  #2 by the  Department                                                                  
of Administration.                                                                                                              
                                                                                                                                
5:34:36 PM                                                                                                                    
                                                                                                                                

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