Legislature(2017 - 2018)HOUSE FINANCE 519
05/09/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB74 | |
| HB124 | |
| HB150 | |
| HB142 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 159 | TELECONFERENCED | |
| += | HB 150 | TELECONFERENCED | |
| += | HB 124 | TELECONFERENCED | |
| + | HB 142 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 74 | TELECONFERENCED | |
HOUSE BILL NO. 142
"An Act relating to unemployment insurance benefits;
increasing the maximum weekly unemployment insurance
benefit rate; and providing for an effective date."
2:40:57 PM
REPRESENTATIVE CHRIS TUCK, SPONSOR, read the sponsor
statement:
The Alaska Department of Labor's Unemployment
Insurance (UI) program provides unemployment benefits
to eligible workers who become unemployed through no
fault of their own, working less than full-time, and
meet certain other eligibility requirements. With the
seasonal nature of much of the state's workforce and
Alaska's vast remoteness, UI benefits serve not only
to bridge the economic gap for the individual worker,
but also as a stabilizing influence on local
economies.
The current Maximum Weekly Benefit Amount (MWBA) of
$370 only replaces 36% of the state's average weekly
wage of $1,020. An MWBA of $510 would provide 50% wage
replacement of the average weekly wage, a nationally
recognized norm.
To compare to other western states, the MWBA rate in
Washington is $681, Oregon is $590, and
California is $450. In addition, Alaska is one of only
three states where the cost of providing UI benefits
is shared by employers and employees.
House Bill 142 would increase the maximum weekly
benefit amount under the UI Program in two steps from
the current $370 to $458 in 2018 and to $510 in 2019.
Among 50 states, the District of Columbia, and Puerto
Rico, Alaska is:
· 39th in Maximum Weekly Benefit Amount
· 44th in Average Weekly Benefit Amount ($252)
· 52nd in Wage Replacement Ratio (.288)
· 9th in Recipiency Rate (unemployed workers
receiving benefits - .37)
As a claimant filing for UI benefits, individuals are
responsible for actively seeking suitable fulltime
employment and reporting activity for seeking
employment each week to remain eligible.
The federal poverty level for a family of three in
Alaska for 2016 is $25,200, or $2100 a month.
An unemployed single parent with two dependent
children receiving the MWBA of $370 plus the dependent
child allowance of $24 per child under 18 (up to a
maximum of three) receives approximately $1800 per
month in UI benefits.
By passing House Bill 142, Alaska will be more in-line
with the average weekly benefits and provide the
necessary financial support families need to survive
while seeking employment.
Representative Tuck relayed that there were representatives
from the Department of Labor and Workforce Development who
worked with the Unemployment Insurance (UI) Program
available for questions.
Co-Chair Foster reviewed the list of available testifiers.
Representative Wilson commented that it looked like the
amount a person made was going up rather than having a cap.
She wondered if the legislation would require employers or
employees to pay a higher percentage into unemployment.
2:45:30 PM
LENNON WELLER, ECONOMIST, RESEARCH AND ANALYSIS, DEPARTMENT
OF LABOR AND WORKFORCE DEVELOPMENT, responded that as the
state increased benefit costs beyond the current schedule
there would be a bit of an increase in costs going out into
the future, as tax rates would need to respond to some
larger benefit costs.
Representative Wilson wanted to know if it would cost
employers or employees more of a percentage than what they
currently contributed to the program. Mr. Weller responded
that there were essentially two steps to the financing of
the UI system. The first main part was a cost recapture
portion which divvied out benefit costs recaptured as a
share. It was a 73/27 split in statute. He relayed that the
share would remain the same. However, as costs increased,
rates would reflect a larger benefit cost. As more benefits
were paid out and the trust fund moved, it would
potentially increase tax rates.
Representative Wilson wondered if the department would have
to come back to the legislature for a statute change if the
rates increased. Mr. Weller relayed that the financing
system was set in statute. The department would not be
required to come back to make a statute change.
Essentially, it was an automatically adjusting system
trying to both maintain rates that were reflective of costs
and a target for the reserve ratio in the fund. All the
financing was directed through current statute.
Representative Wilson wanted to see a chart showing what
the change would look like. She agreed that the rates were
low, especially with a cap in place. She also wanted to
know about the training funds such as the Alaska Technical
Vocational Education Program (TVEP) funds tied to the
state's unemployment. She wondered, that as the state
dwindled some of the funds by increasing funding in another
place, how someone would have access to those funds for
additional training. She was concerned because there had
been an issue in the prior year with unemployment funding.
Representative Tuck wondered if her question was about what
would happen with the TVEP funds if the rates increased. He
thought the TVEP funding rate was 1 percent.
Representative Wilson commented that as more people were
unemployed there would be less money available in the
unemployment fund, the fund that funded TVEP. She indicated
there was also other training programs, paid through the
unemployment fund, available for people needing to find a
new vocation. She wanted to ensure there was enough money
for the programs already using the fund.
Mr. Weller conveyed that an increase in the maximum weekly
benefit amount would not impact either the State Training
and Employment Program (STEP) or TVEP funding to any
extent; they were dedicated taxes paid for out of a portion
of employees' tax rates. It never actually went into the UI
trust fund. It was diverted, pre-deposit, and the rates
were set in statute. It was sixteen hundredths of a
percentage point for TVEP and one tenth of a percentage
point for the STEP training programs of which were offset
against an employee's portion of their initial UI tax
liability.
Representative Tuck responded that unemployment would not
go up because of the bill. Larger benefits would help to
maintain families. If the representative was concerned that
more Alaskans would remain in Alaska and would have to take
advantage of the programs, it was a possibility.
2:51:06 PM
Representative Wilson wanted Alaskans to stay in Alaska.
Her concern was that the excess money that was not utilized
currently would be utilized for other things aside from
benefits. She wanted to ensure that the fund was healthy
enough and those who needed to be retrained could get the
training. She commented that UI was used for other things
besides benefits. She wondered how the state would do more
with less. She thought the cost would fall on the shoulders
of the employer and the employee. Representative Tuck
answered that he did not know what kind of benefits
unemployed Alaskans received if there was left over money.
He thought most of the programs were paid off the top, when
the money went into the fund. He deferred to the
department.
PATSY WESTCOTT, ASSISTANT DIRECTOR, EMPLOYMENT SECURITY,
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, responded
that the funding mechanisms for STEP and TVEP did not
change with the bill. If the department had seen variations
in the amount available for STEP and TVEP, it was because
UI tax rates went up or down. As UI tax rates went up, more
money was collected creating a larger diversion for STEP
and TVEP. As tax rates went down, there was less of a
diversion for STEP and TVEP.
Representative Wilson asked how the rates went up and down.
Mr. Weller answered that the amounts the state would take
in for both the STEP and TVEP programs were based on
taxable wages. Specifically, as taxable wages grew, the
nominal amount of dollars being pulled into either of those
funds would reflect that growth. The rates for the two
programs were fixed. However, the amount of money would
change based on the taxable wage base.
Representative Kawasaki mentioned that in Section 2 of the
bill there were some automatic adjustments in the bill. He
wondered if most states had automatic adjustments. Ms.
Westcott replied that about 26 states had an automatic
adjustment in their statutes to provide for an auto
adjusting maximum weekly benefit amount.
Representative Kawasaki asked if the automatic adjustment
typically pegged to a specific dollar amount or something
else. Ms. Westcott answered that it was typically tied to
the state's average weekly wage or a percentage of the
state's average weekly wage.
Representative Kawasaki reported that in Section 2 it
stated that the department would increase weekly benefits
$2 for each $250. He wondered why the amount was set in
place. Representative Tuck responded that it was already in
statute. The bill was lifting the amount to about the
national average for those individuals making more than the
average per week. He referred to Page 2 which reflected the
same formula, only it extended the higher maximum amount
paid out.
2:55:59 PM
Co-Chair Seaton referred to Page 5 of the handout that
reviewed the weekly benefit amounts. The page was titled,
"Recipiency Rates." He noted that Alaska was the ninth
state on the list. He asked about the meaning of recipiency
rate and whether Alaska's rate was good or bad. He wanted
to better understand the term.
Mr. Weller answered that recipiency rates reflected the
percentage of those who were unemployed, eligible for UI,
and those that were actually collecting UI. He suggested
that the state would want to see as many of the people that
were eligible for the program file for and collect benefits
if possible. Research showed that it helped to stimulate
the economy and provide short-term income, keeping
individuals in a geographical area and allowing them to
reattach to work more quickly.
Co-Chair Seaton asked Mr. Weller to review the percentage
rates. Alaska was at 37 percent. He wondered what factors
lead to Alaska's percentage being so high. Ms. Westcott
responded that each state had its own unique set of
eligibility requirements. In addition to being monetarily
eligible for UI, there were non-monetary disqualifications
such as why someone was not working or their availability
for fulltime work. Fluctuations in recipiency rates could
be seen from state-to-state depending on what other
disqualifications states might have in their laws.
Vice-Chair Gara stated that UI was available to people who
were laid off. He asked if there was a distinction that if
someone was terminated for cause, they would not be
eligible for UI. Ms. Westcott confirmed that Alaska had
disqualifications. For instance, if someone was terminated
for cause, or if someone voluntarily quit their job without
good cause, there was a 6-week disqualification of benefits
under those circumstances.
Vice-Chair Gara asked if Ms. Westcott meant that there were
6 weeks of benefits. Ms. Westcott responded in the
negative. They would be disqualified from receiving
benefits for the first week of unemployment and the
following 5 weeks. There was also a 3-week deduction from
the maximum amount that a person was eligible for over the
term of their benefit year.
2:59:57 PM
Representative Wilson asked for a response about how it
would impact small business in a negative way.
Representative Pruitt asked about the numbers listed at the
bottom of one of the handouts provided by the bill sponsor
[Weekly Benefit Amount Proposal - Page 1] (copy on file).
He asked if the increases listed would take place if the
bill was enacted. Mr. Weller responded that he was correct.
HB 142 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the agenda for the following
meeting.
Representative Wilson made the comment that she had just
received a new iPad. She thought iPads should be used in
lieu of paper.
Co-Chair Foster stated the Co-Chairs would think about the
idea.