Legislature(1999 - 2000)
03/17/1999 01:40 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 87 "An Act relating to money credited to the account of the state in the unemployment trust fund by the Secretary of the Treasury of the United States; and providing for an effective date." REBECCA GAMEZ, DIRECTOR, EMPLOYMENT SECURITY DIVISION, DEPARTMENT OF LABOR testified in support of HB 87. She observed that HB 87 provides statutory language to allow a federal Reed Act distribution. She explained that the current statute AS 23.20.145(f) allows Reed Act funds to be used for the payment of unemployment benefits and the administration of both the Employment Services program and the Unemployment Insurance program. Under the Balance Budget Act of 1997, Congress specified that the distribution of these funds could only apply to the administration of unemployment insurance. The Balance Budget Act also required states to pass enabling legislation. The Reed Act distribution is a transfer of excess funds that are collected through the federal Unemployment Tax Act. When these funds have met a proscribed federal ceiling they give the excess back to the state. The last Reed Act distribution was in 1958. The legislation would allow the state to receive the funds. In response to a question by Co-Chair Therriault, Ms. Gamez explained that the administrative funds would be used for equipment purchases. They anticipate a distribution of $600 - $700 thousand dollars. She observed that $500 - $600 thousand dollars were shifted from an unemployment tax redesign capital improvement project to meet their Y2K needs. The Reed Act distribution would be used to replace the capital project funds. There are no general funds in this component. The department has two years to obligate the funds. Representative Kohring asked how much of the money was paid into the system by Alaskan business. Ms. Gamez stated that the Alaska base is divided by the federal base. Alaskan employers do not pay in as much as other states. The state receives more back then it pays in. Representative Kohring asked if Alaskan businesses could receive a rebate. Ms. Gamez stated that they have not considered a rebate. She noted that Alaska receives 320 percent back for administrative funding. The next highest state receives 120 percent. She did not think that a rebate would substantially lower employer taxes. Co-Chair Mulder asked if the funds were limited to administration of unemployment compensation. Ms. Gamez stated that they were limited to administration of unemployment compensation. Co-Chair Therriault asked if a square footage fee charged to the program for their space in a state building would be covered under administrative costs. Ms. Gamez thought that the rental fee would be covered under administration as long as it was square footage for offices that administered the unemployment insurance program or tax sections. She noted that there are offices in Juneau, Anchorage and other parts of the state. In response to a question by Co-Chair Therriault, Ms. Gamez clarified that the department expects three distributions beginning in 1999. Co-Chair Mulder observed that the funds would have to be appropriated by the legislature. He summarized that a portion could be appropriated to an Alaska Public Building Fund. Ms. Gamez explained that the funds would be appropriated from the rent collections to the Unemployment Security Division. The money could then be applied to the square footage of maintenance in state buildings. Co-Chair Therriault clarified that it is not an appropriation bill. DAN KANOUSE, BUDGET ANALYST, EMPLOYMENT SECURITY DIVISION, DEPARTMENT OF LABOR explained that the Department of Labor would receive the funds on October 1, 1999 for use in FY00. Representative J. Davies MOVED to report HB 87 out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 87 was REPORTED out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Labor, dated 3/5/99.