Legislature(2001 - 2002)
04/06/2001 03:20 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 58-UNEMPLOYMENT COMPENSATION BENEFITS Number 1977 CHAIR MURKOWSKI announced that the committee would take up HOUSE BILL NO. 58, "An Act relating to the calculation and payment of unemployment compensation benefits; and providing for an effective date." AMY ERICKSON, Staff to Representative Lisa Murkowski, Alaska State Legislature, speaking as the committee aide for the House Labor and Commerce Standing Committee, came forward to explain the proposed committee substitute (CS), Version C [22-GH1016\C, Cramer, 4/5/01]. She reported Version C it deletes the indexing previously included, and implements the increases to unemployment insurance (UI) in three phases. In 2002, it will go from $250 to $272 [a week]; in 2003, from $272 to $292; and in 2004, from $292 to $320. The Department of Labor and Workforce Development (DLWD) has seen [Version C], she said, and hasn't had a problem with it this far. Number 1918 REPRESENTATIVE MEYER asked whether this would take out the index and the indicator, and add a three-year [phase-in scheme]. MS. ERICKSON answered in the affirmative. CHAIR MURKOWSKI explained that there were concerns that making the jumps in [two years] would be a "hit" to the employer, so it was softened with a [three-year phase-in]. She mentioned that committee members should have received an explanation of the delayed impact of the benefit increases on tax rates; it is not an easily understood process. Number 1845 REBECCA NANCE GAMEZ, Deputy Commissioner, Department of Labor and Workforce Development (DLWD), came forward and said a three- year phase-in is great, although the DLWD would have preferred two [years]. However, she thought there were some good compromises. MS. GAMEZ explained that every year a calculation is done in UI when a benefit changes; this happens over a sliding three-year window, because it moderates the economic impact on the taxpaying employer. Thus an increase doesn't happen right away, but phases in when it gets to certain trust fund levels. The three-year period is used to calculate the new tax rate. In this case, it will be effective January 1, and the period ending the previous June 30 makes basically zero impact on the first year for employers. The following year, there are six months of increased benefit costs resulting from the increased weekly benefit amount. In the third year, the increased costs for the first year and for half of the second year are included in that average. MS. GAMEZ, in response to a question about removal of the indexing, said the department would rather have [kept] the indexing to the annual weekly wage, but is flexible. Number 1706 REPRESENTATIVE ROKEBERG expressed his belief that it is best to have a periodic review of these rates. He doesn't think a lot of Alaskans object to having a reasonable rate, he said, but there are some sound objections to the qualifications of benefits in Alaskan programs. [The legislature] might want to look at it, because employees pay such a small amount of their income into the tax pool and employers pay the vast majority of it. Too often, he remarked, people look at this benefit as a right, not as an insurance benefit to tie them over until the next job. There is an abuse in this program, he exclaimed, and it deserves some review; he added that [the state] is now raising taxes on businesses and passing it on to people who may be abusing the program. REPRESENTATIVE HALCRO commented that [the legislature] is anticipating another Senate bill diverting some money from the UI trust fund to the university for programs. Once that money is taken out, it needs to be replaced. It is not a very clean way to fund the university, he expressed, and it could be called a tax on business to support the university, which is nothing more than a hidden tax. Number 1557 REPRESENTATIVE ROKEBERG remarked that the State Training and Employment Program (STEP) is becoming more suspect in the way it is funded, in his opinion, and he doesn't think most people in the state know it is there. The use of some of those funds is troublesome, he emphasized, and if there is going to be a second dip into the fund for allegedly excess funds, then either [the state] is collecting too much money or there is a low level of unemployment in the state. He said it is a systemic problem that he is concerned about, and he probably wouldn't be supporting that bill for that very reason. CHAIR MURKOWSKI requested confirmation that the [UI trust] fund is solvent, and that even if [the legislature] were to "raid" it, it wouldn't jeopardize that solvency. Number 1479 MS. GAMEZ clarified that there are no excesses in the UI trust fund. The diversions that go to the STEP program come out of the worker contribution; however, that "backdoors" the employers, who have to make up those reserves in the trust fund. The first STEP program is pretty pure, she said; she refrained from commenting on the second one. She emphasized that there are no excesses; federal law guides the trust fund reserve rates; and once money is in the trust fund, it can't be taken out. She offered to leave a one-page handout explaining this with the committee aide. CHAIR MURKOWSKI commented that the sentiment she has heard is that a reasonable [increase] is to be expected, and in looking at statistics on Alaska, [the legislature] could probably go a bit further. The concern she'd heard was of being tied to the index, which is truly a policy consideration; it didn't seem that people were prepared to go forward with that at this time. Number 1394 CHAIR MURKOWSKI said she is comfortable with the end product, and is willing to moving it to the next committee. REPRESENTATIVE CRAWFORD expressed disappointment that tying it to the average weekly wage is now [off the table]. He would have thought it better, for employers and employees alike, to not have to go five years without adjustments and then to have a sudden bump. Even if [the committee] had taken [the maximum weekly benefit amount] to $300 rather than $320, it would have been 47 percent of the average weekly wage. [The committee] could have tied it to a 47 percent replacement, which he said would have been a good compromise; however, he recognized that some adjustment is better than none. He added that [the legislature and the department] will be back in a few years to argue it out again. Number 1243 REPRESENTATIVE HALCRO made a motion to adopt the proposed CS, version 22-GH1016\C, Cramer, 4/5/01, as a work draft. There being no objection, Version C was before the committee. REPRESENTATIVE ROKEBERG said in looking at Sections 3 and 6, he is contemplating a conceptual amendment to remove Section 3. He suggested that if it is appropriate to put Section 3 back in, in [2004], it would be up to that legislature at that time. CHAIR MURKOWSKI responded that if Section 3 were removed, the weekly benefit amount could go no higher than $296. It would put [Alaska] far below the $320 or 50 percent of the average weekly wage, which is where that $320 number came from initially. [The state] would arrive at the $296 in 2003, but it would then be capped. REPRESENTATIVE ROKEBERG said it depends on what the average weekly wage is three years from now. CHAIR MURKOWSKI noted that [the committee] has taken out the reference to a tie to the average weekly wage. MS. GAMEZ concurred. REPRESENTATIVE ROKEBERG asked whether the numbers are based on that. CHAIR MURKOWSKI said that is how the division came up with $320. Number 1048 REPRESENTATIVE ROKEBERG said if he could move that amendment, it would leave the future legislature to reexamine the issue and either raise or lower [the amount]. It might be found at that time that [the amount in] Section 3 is too low. He suggested that what [the committee] is doing here is a de facto sunset in a sense. CHAIR MURKOWSKI clarified that [the committee] is just adding to the existing schedule, and there will be [three] incremental bumps: one in 2002, up to $272; one in 2003, up to $296; and one in 2004, up to $320. The schedule ends after that, as it ends now at $248. REPRESENTATIVE ROKEBERG said the question is whether the department, organized labor, and employers would come back to the legislature and say it needs adjustment. This gives a quicker reaction time; historically, the legislature has taken this up every four to five years. He suggested that much of it depends on the economy and [Alaska's] average weekly wage. If [Alaska] has an energy bill and the gas pipeline, there will be an acceleration of wages, and there would be a [disparity] between some employment classifications and the regular folks who do most of the work of the state. He asked if it wouldn't be better to revisit it earlier. CHAIR MURKOWSKI said that would be the hit to the employer, which the effort is to avoid. Number 0912 MS. GAMEZ reported that Thom Wiley, UI Actuary, had talked with the people at British Petroleum (BP); the employment [BP] expects from the gas pipeline and from opening the Alaska National Wildlife Refuge (ANWR) [to drilling] would result in an overall impact on the average weekly wage of $5.00 or $6.00, so it would go from $239.50 to about $246.50. REPRESENTATIVE ROKEBERG said that is one person's opinion. REPRESENTATIVE CRAWFORD recalled that at the end of the pipeline [construction] in 1978, it took 26 weeks to ripple through the economy and was back down to a much lower average weekly wage shortly after the pipeline was complete. That is when being tied to the average wage would benefit employers, he said, because it mirrors the economy. Around the 1980s, things got "slim" for construction workers, and the average weekly wage dropped considerably. He offered his opinion that had [Alaska] been tied to an average weekly wage, the benefits would have gone down and the taxes on the employers would have followed. REPRESENTATIVE HALCRO commented that if the committee removed Section 3 so there was not an increase on January 1, 2004, the department would have to come back to the legislature sooner; however, a forum would be provided for legislators to say, "Look, you were just back three years ago ... getting an increase." He said the longer [the committee] can stretch it out, the more evenly the increases will be for employers and the more [the state] will benefit. Then in 2005 or 2006 [the legislature] can revisit it. REPRESENTATIVE ROKEBERG pointed out that the majority of people who are paid UI benefits are not union members or construction workers; the bulk of the people in the state pay taxes when working, and the service industry is a bigger employer in the state. When there are economic cycles, he said, those wages tend to go up, but usually they don't go down as fast. The gross amount of taxation on business is still going to go up, he exclaimed. Number 0698 REPRESENTATIVE CRAWFORD remarked that after [pipeline construction workers] made the average go way up, they also made the average go way down shortly [after construction was complete, in 1978], which is what he was speaking to. REPRESENTATIVE ROKEBERG said the economy and the overall wages and disposable income kept going up until 1986. Number 0652 REPRESENTATIVE HAYES made a motion to move the CS for HB 58, version 22-GH1016\C, Cramer, 4/5/01, out of committee with individual recommendations and the attached fiscal note. There being no objection, CSHB 58(L&C) moved from the House Labor and Commerce Standing Committee.
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