Legislature(1995 - 1996)

04/03/1996 03:28 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 SB 261 - UNEMPLOYMENT COMPENSATION                                          
 Number 1742                                                                   
 CHAIRMAN KOTT announced the next order of business would be SB 261            
 "An Act relating to the release of employment security records;               
 relating to an injunction or an employer's security for delinquent            
 unemployment insurance contributions; extending time periods for              
 redeterminations and appeals for unemployment insurance; relating             
 to the overpayment or the redetermination of unemployment insurance           
 benefits; relating to availability for work, seeking work, and the            
 calculation of wages for unemployment insurance purposes; relating            
 to voluntary federal tax withholding from unemployment insurance              
 benefits; relating to the binding effect of unemployment                      
 compensation decisions; relating to the definition of `waiting                
 week' for employment security purposes; and providing for an                  
 effective date," sponsored by the Senate Labor and Commerce                   
 SHERMAN ERNOUF, Legislative Assistant to the Senate Labor and                 
 Commerce Committee, Alaska State Legislature, explained the SB 261            
 was introduced by request of the Department of Labor.  He explained           
 it is a cleanup bill of the unemployment Security Code.  Mr. Ernouf           
 then referred the committee to Dwight Perkins.                                
 Number 1784                                                                   
 DWIGHT PERKINS, Special Assistant, Office of the Commissioner,                
 Department of Labor, read his statement into the record:                      
 "The bill before the committee makes several changes to the                   
 Employment Security Act in six major areas:  Federal income tax               
 withholding; confidentiality of records; contributions and                    
 collection; benefit overpayments; finality of determinations; and             
 appeals.  In addition, the bill contains a few minor and technical            
 "Regarding income tax withholding, one important change brings the            
 Employment Security Act into conformity with a new federal                    
 provision that requires states to allow claimants to have income              
 withheld from their benefits to cover their federal income tax                
 "In the confidentiality of records section, proposed changes to AS            
 23.20.110 would allow the department to provide additional specific           
 unemployment insurance information to other entities under strict             
 disclosure guidelines.  This information exchange will support and            
 enhance the department's own programs, as well as assisting other             
 state programs.  The information would be used only to protect the            
 unemployment compensation fund; enhance employment, training, and             
 labor market information programs; and assist state eligibility               
 verification and collection functions.  These changes do not                  
 rescind the public disclosure prohibitions already in As 23.20.110.           
 They are intended only to increase efficiency of state government             
 while retaining current privacy safeguards.                                   
 "In the contributions and collection section, Mr. Chairman, two               
 provisions would provide important tools for collecting delinquent            
 contributions.  First, the department would be authorized to                  
 require a deposit or bond from an employer who is at least two                
 quarters delinquent in making contributions to the unemployment               
 compensation fund.  The bill also allows the department to enjoin             
 a delinquent employer, who refuses to post a bond or pay                      
 contributions, from operating as an employer.  The department would           
 use these provisions only in situations where existing remedies in            
 the Employment Security Act are not effective, as for example,                
 where an employer operates without significant assets subject to              
 lien or seizure.  These uncollectible accounts are currently being            
 subsidized by the rest of Alaska's employers who pay contributions            
 on a timely manner.  An additional change allows the department to            
 notify employing units of their contractor's or subcontractor's               
 liability for contributions to the unemployment compensation fund.            
 This information will help employers to meet their obligation to              
 require contribution bonds of their subcontractors before making              
 contract payments.                                                            
 "In the benefit overpayments section, the standard for waiving                
 unemployment insurance overpayments would be changed from `great              
 hardship' to `equity and good conscience.'  The new standard would            
 allow the department to consider other factors, such as the degree            
 of good faith in claiming benefits and the claimant's detrimental             
 reliance on these benefits.  The bill would also permit the                   
 department to write off uncollectible overpayments after two years.           
 Practice has shown that most recoverable overpayments are collected           
 within two years.                                                             
 "In the finality of determinations, the department would be given             
 clear authority to correct any determination during the benefit               
 year of an unemployment claim.  This change will increase the                 
 accuracy of claim adjudication.                                               
 "In our appeals section, a proposed amendment would provide a                 
 uniform 30 day time period for filing appeals from any                        
 determination made by the department.  The current 15 day period              
 probably impacts rural parties unfairly and may not allow enough              
 time to review and consider an appeal.  A longer period would still           
 allow for prompt disposition of claims and assessments.                       
 "The bill would also clarify the legal effect of appealed                     
 decisions.  It would make it clear that findings of fact and                  
 conclusions of law in unemployment hearings are not binding in                
 another proceeding.  The purpose of this amendment is to prevent              
 parties from excessively litigating issues based on the effect the            
 department's rulings may have on later civil litigation.  This                
 change will help keep unemployment hearings speedy, informal and              
 "Both the 30 day appeal period and the provision restricting the              
 scope of department decisions address concerns of a recent                    
 legislative audit of the unemployment insurance appeals process.              
 "Finally, Mr. Chairman and committee members, the minor and                   
 technical changes that I spoke about earlier are additional                   
 amendments would allow an insured worker to continue receiving                
 unemployment benefits while attending the funeral of an immediate             
 family member; require a worker to file a compensable claim for the           
 week immediately before jury duty or attendance at a funeral in               
 order to receive an eligibility exemption for those reasons; exempt           
 extended benefit claimants from the work search required while                
 attending an approved training course; correct the definition of              
 the `waiting week' in the Employment Security Act; and finally,               
 clarify the treatment of `cafeteria plan' payments under the wage             
 definition in the Act."                                                       
 MR. PERKINS said that concludes his testimony.                                
 Number 2222                                                                   
 REPRESENTATIVE ROKEBERG referred to page 8, line 14, Section 14,              
 where the bill lowers from six years to two years the period in               
 which the commissioner shall seek to make recovery for overpaid               
 benefits and said his first impression is it seems like we're not             
 being diligent enough to collect these overpayments.                          
 MR. PERKINS said he would defer that question to Mr. Torgerson.  He           
 said regarding the recoverable payments, he believes the department           
 is at 90 percent of payments that are overpaid.                               
 Number 2332                                                                   
 RON TORGERSON, Chief Hearing Officer, Division of Employment                  
 Security, Department of Labor, explained he worked on the drafting            
 of the bill.  He said most of their overpayments are recovered.  He           
 said their non-front recovery rate is better than 90 percent.  Most           
 of them are recovered or offset from benefits within about two                
 years.  Mr. Torgerson explained this won't cause the department to            
 walk away from the overpayments at all.  It is not prescriptive and           
 doesn't require the department to write off the overpayment, it               
 just allows it.  He explained there have been instances where                 
 they've written off an overpayment and then determined somebody has           
 returned to Alaska and have reinstituted it and collected it.  This           
 wouldn't significantly impact collection.                                     
 REPRESENTATIVE ROKEBERG asked why we are doing this.                          
 MR. TORGERSON said he believes the department's point is just to              
 not carry uncollectible overpayments on the books.  It does drag              
 down the recovery rate (indisc.).  If they're uncollectible, it               
 seems expedient to write them off.  He noted some stats don't ever            
 write them off, some states write them off after six months, two              
 years is sort of medium period to keep the overpayment on the books           
 [END OF TAPE....]                                                             
 TAPE 96-33, SIDE A                                                            
 Number 001                                                                    
 MR. TORGERSON continued, "It isn't a vital position, I don't                  
 believe, it is simply that there is no reason for showing                     
 overpayments on the books that are uncollectible."                            
 REPRESENTATIVE ROKEBERG noted his concern that they aren't being              
 carried on the record.  It says in the provision that a record                
 could also be thrown out.  He pointed out that a six year holding             
 period for records is similar to the Internal Revenue Service's               
 standards for record keeping.  Representative Rokeberg referred to            
 throwing the record out and questioned how would you collect on a             
 Number 081                                                                    
 MR. PERKINS said he believes that even after six years, if a person           
 returns to the state they would be able to collect those funds.  He           
 stated it is not a complete deletion of the case file.  It is a               
 measure of time in a window period that they can look back and see            
 what is outstanding or what is not outstanding after two years.               
 Mr. Perkins stated that in no way do they intend to delete the                
 file.  If the person comes back to the state, the department plans            
 on diligently collecting those funds.  He again pointed out that              
 they have had a 90 percent recovery rate.                                     
 CHAIRMAN KOTT asked if the 90 percent recovery rate fell within the           
 two year time period or over six years.                                       
 MR. TORGERSON explained most of the overpayments are collected                
 fairly quickly and usually by offsetting against benefits that the            
 person may be eligible for down the line.  He said he can't                   
 confirm, without more research, exactly how many overpayments are             
 recovered within two years.  He noted they are working on a new               
 system which is called a "Bart System" which is being instituted              
 under a federal grant.  It would allow the department to monitor              
 and discover overpayments much more quickly.  It should increase              
 the department's collection rate even more.                                   
 REPRESENTATIVE ROKEBERG asked what a typical circumstance is that             
 creates an overpayment.                                                       
 MR. TORGERSON said a majority of the overpayments are because of              
 misreported wages on claims.  Wages and other income are deductible           
 from benefits and, in most instances, it is not fraudulent                    
 misreporting, it is just incorrect answers on claim forms.  He                
 informed the committee the average overpayment is about $216 which            
 is slightly over the maximum benefit amount for one week.  The vast           
 majority of the overpayments are recollected very quickly by offset           
 from any future benefits.                                                     
 REPRESENTATIVE ROKEBERG pointed out that in Alaska there is                   
 seasonal work.  He asked if the department carries the outstanding            
 balances to the following calendar year.                                      
 MR. TORGERSON said they do.  The current system the department is             
 operating under, basically cross matches, every quarter, the claims           
 filed against the wage reports of every employer in the state.  If            
 the program sees that an individual files a benefit claim in a                
 quarter in which the employer has reported wages for him, the                 
 probability of a waited match is assigned to that and the case is             
 investigated.  He noted the new system will do this more                      
 Number 371                                                                    
 REPRESENTATIVE SANDERS said the file isn't being thrown away, it is           
 just being put into a file drawer somewhere.  If something comes              
 up, they can go and get it back out of the drawer.                            
 MR. TORGERSON said it gets cases out of the system that has a much            
 lower probability of collecting so that they can focus on the cases           
 that are collectable.                                                         
 Number 412                                                                    
 REPRESENTATIVE PORTER asked what would trigger the ability to go              
 back to a case.                                                               
 MR. TORGERSON said he wasn't sure exactly how long the computer               
 system keeps claims archived, but it is a good many years.  He said           
 the department has had cases where the head of the benefit payment            
 control unit has reinstituted the overpayment and collected it                
 after it becomes obvious that, through a tip or any other                     
 information, that the overpayment is collectable.                             
 Number 458                                                                    
 MR. PERKINS said once there is a qualifying event by a claimant,              
 then that would raise a red flag, or possibly through employment              
 security taxes that the employer pays on an individual.                       
 REPRESENTATIVE PORTER said if the file is purged, how would the red           
 flag get raised.                                                              
 MR. TORGERSON said he can't say for sure.  He said he wants to                
 emphasize that this particular section doesn't require the                    
 department to write off anything.  The department isn't required to           
 write off after six years.                                                    
 Number 516                                                                    
 CHAIRMAN KOTT said in the provision, it indicates that the                    
 commissioner may declare the sums uncollectible and cancel both the           
 resulting shortage and related records.  It doesn't mean that the             
 commissioner will.  Chairman Kott said he would suspect that in               
 some circumstances he won't.                                                  
 MR. TORGERSON said that is correct.  He said the commissioner would           
 like the discretion to be able to write off what appears to be                
 uncollectible overpayments quickly.  The commissioner isn't                   
 necessarily going to write those overpayments off.                            
 REPRESENTATIVE ROKEBERG asked if this wouldn't have the net affect            
 of making the commissioner's record of collection look better.                
 MR. TORGERSON indicated it would.  He pointed out Oklahoma has one            
 of the worst overpayment recovery records simply because they write           
 off nothing.  They're still collecting on overpayments made after             
 World War II.  He said the department is subject to a variety of              
 federal oversight and one of the components is overpayment recovery           
 rate.  Mr. Torgerson said the commissioner is not extremely                   
 interested in having the records burdened with uncollectible                  
 accountants.  He stated Alaska has been first in the nation in                
 overpayment recovery.  In past years we were fourth or sixth.                 
 Number 769                                                                    
 CHRIS CHRISTENSEN, Staff Counsel, Office of the Administrative                
 Director, Alaska Court System, was next to come before the                    
 committee.  He explained when a bill is labeled "housekeeping and             
 cleanup" sometimes it is easy for it to fall through the cracks.              
 He said there is one very substantial change to current law in                
 Section 3 which was added at the Court System's request by the                
 Department of Labor prior to introduction.  Mr. Christensen said              
 both the state and federal constitutions provide that if a person             
 is charged with a crime and can't afford a lawyer, the state has to           
 provide one for free.  The Court System has the prime                         
 responsibility for determining indigency and does the best job they           
 can, but they are funded by the legislature with only four people             
 statewide, two in Anchorage and two in Fairbanks.  Section 3                  
 provides the Court System with a very important new tool to                   
 determine indigency.  It says the court system will have access to            
 the Department of Labor's employment security tax records for                 
 purposes of determining indigency.  Mr. Christensen said this will            
 make it much easier for the Court System to determine if a person             
 is truly eligible.  He said they also requested that an additional            
 section be put into Section 3 which would give the Department of              
 Law's Finance Collection Unit access to the same data.  He noted              
 the Finance Collection Unit is funded by program receipts.  It has            
 responsibility for collecting criminal fines that are unpaid as               
 well as collecting the monies which the Court System orders                   
 indigent defendants to pay for their public defender services once            
 they acquire money in the future.  Mr. Christensen explained that             
 currently, the Finance Collection Unit primarily goes after                   
 permanent fund dividends because there is no easy and inexpensive             
 way to do anything else.  Once they have got access to these                  
 records, they'll be able to garnish paychecks because they'll know            
 when somebody has gone back to work and is making money.                      
 Number 800                                                                    
 There being no further witnesses, REPRESENTATIVE ROKEBERG made a              
 motion to move SB 261 out of committee with individual                        
 recommendations and a zero fiscal note.                                       
 CHAIRMAN KOTT asked if there was an objection.  Hearing none, SB              
 261 was moved out of the House Labor and Commerce Committee.                  

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