Legislature(2017 - 2018)BARNES 124

04/12/2017 03:15 PM LABOR & COMMERCE

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Audio Topic
03:21:46 PM Start
03:22:25 PM HB142
03:41:59 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled but Not Heard
-- Public Testimony --
<Bill Hearing Canceled>
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 142(L&C) Out of Committee
-- Public Testimony --
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         April 12, 2017                                                                                         
                           3:21 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Sam Kito, Chair                                                                                                  
Representative Adam Wool, Vice Chair                                                                                            
Representative Andy Josephson                                                                                                   
Representative Louise Stutes                                                                                                    
Representative Chris Birch                                                                                                      
Representative Gary Knopp                                                                                                       
Representative Colleen Sullivan-Leonard                                                                                         
MEMBERS ABSENT                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
Representative Bryce Edgmon (alternate)                                                                                         
COMMITTEE CALENDAR                                                                                                            
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."                                                                                               
     - MOVED CSHB 142(L&C) OUT OF COMMITTEE                                                                                     
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 142                                                                                                                  
SHORT TITLE: UNEMPLOYMENT COMPENSATION BENEFITS                                                                                 
SPONSOR(s): REPRESENTATIVE(s) TUCK                                                                                              
02/24/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/24/17       (H)       L&C, FIN                                                                                               
03/29/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/29/17       (H)       Heard & Held                                                                                           
03/29/17       (H)       MINUTE(L&C)                                                                                            
04/12/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
REPRESENTATIVE CHRIS TUCK                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   As prime  sponsor, reviewed the  changes in                                                             
the proposed committee substitute, Version O, for HB 142.                                                                       
KENDRA KLOSTER, Staff                                                                                                           
Representative Chris Tuck                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   On behalf  of  Representative Tuck,  prime                                                             
sponsor of HB 142, answered a question regarding HB 142.                                                                        
ED FLANAGAN, Director                                                                                                           
Division of Employment & Training Services                                                                                      
Department of Labor & Workforce Development (DLWD)                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions related to HB 142.                                                                    
LENNON WELLER, Economist                                                                                                        
Research and Analysis                                                                                                           
Division of Administrative Services                                                                                             
Department of Labor & Workforce Development (DLWD)                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions related to HB 142.                                                                    
DENNIS KNEBEL, President                                                                                                        
Anchorage Central Labor Council                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 142.                                                                          
ACTION NARRATIVE                                                                                                              
3:21:46 PM                                                                                                                    
CHAIR  SAM KITO  called  the House  Labor  and Commerce  Standing                                                             
Committee meeting  to order at  3:21 p.m.   Representatives Kito,                                                               
Sullivan-Leonard, Stutes, Knopp, Birch,  Josephson, and Wool were                                                               
present at the call to order.                                                                                                   
           HB 142-UNEMPLOYMENT COMPENSATION BENEFITS                                                                        
3:22:25 PM                                                                                                                    
CHAIR KITO  announced that  the only order  of business  would be                                                               
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."                                                                             
3:22:50 PM                                                                                                                    
REPRESENTATIVE  WOOL  moved  to   adopt  the  proposed  committee                                                               
substitute (CS)  for HB 142, Version  30-LS0530\O, Wayne, 4/6/17,                                                               
as the working document.                                                                                                        
CHAIR KITO objected for purposes of discussion.                                                                                 
3:23:23 PM                                                                                                                    
REPRESENTATIVE  CHRIS TUCK,  Alaska State  Legislature, as  prime                                                               
sponsor,  reviewed  the two  changes  in  Version  O of  HB  142.                                                               
Regarding the first  change [on page 9, line 13],  he stated that                                                               
Section  2,  subsection  (h),  was amended  by  adding  the  word                                                               
"annually"  to  specify that  the  department  shall provide  for                                                               
increases  annually.    Regarding  the  second  change,  he  said                                                               
Section 2, subsection (i), was  amended to remove the requirement                                                               
for publication of the notice  of changes to the benefit schedule                                                               
in  the  Alaska Administrative  Code.    He explained  that  such                                                               
notices are  not published  in the  administrative code,  so this                                                               
was an error in the drafting and that language was removed.                                                                     
3:24:14 PM                                                                                                                    
REPRESENTATIVE SULLIVAN-LEONARD requested  clarification of where                                                               
the changes were made.                                                                                                          
CHAIR KITO  replied that the  changes are  on page 9,  Section 2,                                                               
and requested Ms. Kloster to answer further.                                                                                    
KENDRA KLOSTER,  Staff, Representative  Chris Tuck,  Alaska State                                                               
Legislature, on  behalf of Representative Tuck,  prime sponsor of                                                               
HB 142, stated that the word  "annually" was added to [Section 2,                                                               
subsection (h)], on page 9, line 13.                                                                                            
3:25:00 PM                                                                                                                    
CHAIR  KITO withdrew  his objection  to the  motion to  adopt the                                                               
proposed  committee  substitute  (CS)  for HB  142,  Version  30-                                                               
LS0530\O,  Wayne, 4/6/17,  as the  working document.   Therefore,                                                               
Version O was before the committee.                                                                                             
3:25:31 PM                                                                                                                    
REPRESENTATIVE  WOOL  inquired about  the  change  in Section  2,                                                               
subsection  (h), which  provides that  [annually] after  December                                                               
31, 2019,  the department shall  increase weekly  benefit amounts                                                               
by $2 for  each $250 [by which an individual's  base period wages                                                               
exceed $59,500].   He asked whether  the cap of $510  for $59,500                                                               
would  be  lifted  after  December 31,  2019,  and  he  requested                                                               
further clarification.                                                                                                          
REPRESENTATIVE TUCK  responded that  it depends  on and  is based                                                               
upon the average Alaskan income and there is a formula.                                                                         
CHAIR  KITO further  explained  that on  December  31, 2019,  the                                                               
department  would review  the average  annual salary  and if  the                                                               
average  annual salary  is  above $59,500,  then  for every  $250                                                               
above what the average annual salary  is, $2 will be added to the                                                               
weekly benefit.                                                                                                                 
REPRESENTATIVE  WOOL offered  his understanding  that $59,500  is                                                               
the statewide average and is not for an individual.                                                                             
REPRESENTATIVE TUCK replied correct.                                                                                            
3:27:18 PM                                                                                                                    
REPRESENTATIVE  STUTES inquired  whether  the prior  year is  the                                                               
qualifying wage period.                                                                                                         
REPRESENTATIVE TUCK  replied he  is unsure whether  it is  a full                                                               
year and  requested that a  department representative  be allowed                                                               
to provide the answer.                                                                                                          
ED  FLANAGAN,   Director,  Division  of  Employment   &  Training                                                               
Services,  Department of  Labor &  Workforce Development  (DLWD),                                                               
replied  yes, that  is the  base  year and  it is  the full  year                                                               
prior.  He  explained that there is  a lag of one  quarter, so if                                                               
somebody opened  a claim  today [via  online as  it is  no longer                                                               
done in  person] it  would be  based on calendar  year 2016.   If                                                               
someone had  opened a  claim before [January  1, 2017,]  it would                                                               
have been based on October 1, 2015,  and through one year.  It is                                                               
a full year, he reiterated,  and everything the person has earned                                                               
in wages in a full year.                                                                                                        
REPRESENTATIVE  STUTES offered  her  understanding that  it is  a                                                               
full  year, meaning  12 months  from  the beginning  of the  last                                                               
quarter from which the claimant is filing.                                                                                      
MR. FLANAGAN responded yes, with a quarter in between.                                                                          
MR. FLANAGAN  further pointed  out that  the average  annual wage                                                               
right now  is $53,000.   He explained  that the $59,500  is where                                                               
the division runs  out the schedule to come up  with the [weekly]                                                               
benefit [depicted in  the third column under Section  1] and this                                                               
benefit is  half of the average  weekly wage.  He  clarified that                                                               
after December  31, 2019, an  adjustment would occur only  if the                                                               
average annual  wage has gone up,  and it is not  projected to go                                                               
up for the next two to three years at least.                                                                                    
3:29:01 PM                                                                                                                    
REPRESENTATIVE KNOPP inquired about  the amount of weekly benefit                                                               
that would  be received, as  depicted in the third  column [under                                                               
Section 1].                                                                                                                     
MR. FLANAGAN answered that if the  bill were to pass, this is the                                                               
benefit schedule  that would be  in effect.   It is very  easy to                                                               
get confused,  he said, because  the base  year is one  thing and                                                               
the average  annual wage is  another.  Should the  average annual                                                               
wage go  up to, for example,  $59,000, there would at  that point                                                               
be an  increase in the [weekly]  amount.  He explained  that this                                                               
is the way the state has  always raised the increase when it does                                                               
make an  adjustment   the state  runs the schedule out  longer so                                                               
there  is  not the  situation  which  is  referred to  now  under                                                               
current law where  somebody who makes $84,000 in his  or her base                                                               
year gets  the same  benefit as  someone who  makes $42,000.   It                                                               
acknowledges that some people are  going to need more to maintain                                                               
their lifestyle.                                                                                                                
REPRESENTATIVE  KNOPP  posed  a   scenario  in  which  the  state                                                               
averages  $59,000  or $59,250  for  a  number  of years,  then  a                                                               
recession   occurs,  and   everybody  is   laid  off   and  their                                                               
unemployment benefits  are at about  $508.  He asked  whether the                                                               
state is going to get to that  point and said his concern is that                                                               
Alaska  doesn't   lead  the  nation  in   unemployment  insurance                                                               
benefits  and  causing  people  to  be  incentivized  to  not  be                                                               
aggressively  looking for  work.   Another  of  his concerns,  he                                                               
continued, is  that by  increasing these  rates it  will increase                                                               
the cost to employers    a jump of 42 percent  over five years by                                                               
2023.  He asked whether he is accurate with this number.                                                                        
MR. FLANAGAN  stressed that  that is over  what is  projected had                                                               
nothing  been  done for  employees  who  make $39,000,  which  is                                                               
currently the  maximum and  the point  at which  contributions by                                                               
both employers and employees stop.                                                                                              
REPRESENTATIVE KNOPP stated he hopes  the committee will consider                                                               
the contribution rate.  He  offered his belief that employers are                                                               
paying 6.5  [percent] and  employees 1.5 and  said he  would like                                                               
for  the committee  to talk  about the  rates that  employees pay                                                               
versus what  employers pay.   He also noted that  state employees                                                               
are eligible  for unemployment insurance  benefits, but  that the                                                               
employees don't contribute while the state does.                                                                                
MR. FLANAGAN  replied that  if HB 142  were passed,  Alaska would                                                               
never  be  the state  with  the  highest maximum  weekly  benefit                                                               
amount because  there are  other states that  gear it  towards as                                                               
much as  60 percent  of the  average annual  wage.   For example,                                                               
Washington is currently at $690,  which is much higher than where                                                               
Alaska  would be  with this  bill.   He offered  his belief  that                                                               
Washington's benefits  automatically adjust,  as do  the benefits                                                               
in  many   states.     Regarding  Representative   Knopp's  first                                                               
question, Mr. Flanagan said that  if a person were making $59,000                                                               
when this  bill is passed,  then yes,  the person would  get $508                                                               
because that is  based on the current average  annual wage, which                                                               
is $53,000.   When the  average annual  wage gets up  to $59,000,                                                               
which would be several years  from now, the maximum benefit would                                                               
be about $570  or $580 due to the automatic  adjustor.  Regarding                                                               
Representative Knopp's second  question about contribution rates,                                                               
Mr. Flanagan  said they do  fluctuate but that the  employee rate                                                               
is  currently  at the  statutory  minimum  for employees  of  0.5                                                               
[percent].  He added that the  employee rate has a minimum of 0.5                                                               
and  a maximum  of 1.0  and  noted that  Alaska is  one of  three                                                               
states in  which employees  pay anything.   The  current employer                                                               
contribution is, on average, about  1.01 [percent].  The employer                                                               
minimum is  1 percent  and there  is no  maximum on  the employer                                                               
3:35:09 PM                                                                                                                    
LENNON  WELLER,  Economist,  Research  &  Analysis,  Division  of                                                               
Administrative   Services,  Department   of  Labor   &  Workforce                                                               
Development (DLWD), noted  that he serves as the  actuary for the                                                               
unemployment  insurance  system.     Speaking  to  Representative                                                               
Knopp's questions,  he said the  average rate for an  employer is                                                               
1.01 percent, which is just off  the 1.0 percent minimum rate for                                                               
employers, with the maximum being 6.5 percent.                                                                                  
REPRESENTATIVE KNOPP  offered his  understanding that  Mr. Weller                                                               
is saying a maximum rate of 6.5 percent.                                                                                        
MR.  WELLER replied  correct and  added that  no employer  can be                                                               
charged more than that.                                                                                                         
REPRESENTATIVE KNOPP  offered his understanding that  6.5 percent                                                               
is not where the rate is at.                                                                                                    
MR. WELLER responded that the  rate is currently at one-hundredth                                                               
of a percentage point off the minimum rate.                                                                                     
REPRESENTATIVE KNOPP asked what the  contribution rate is for the                                                               
Technical and Vocational Education Program (TVEP).                                                                              
MR. WELLER  answered that the  current contribution rate  for the                                                               
TVEP program is 0.16 percent.                                                                                                   
REPRESENTATIVE  KNOPP  inquired whether  the  0.16  percent is  a                                                               
component of the 1.01 percent that employers are paying.                                                                        
MR. WELLER  replied that it is  a portion of what  employees pay.                                                               
Employees currently pay a half  a percentage point, of which 0.16                                                               
is attributed towards the TVEP program.                                                                                         
REPRESENTATIVE KNOPP asked whether  part of the conversation here                                                               
should include state employees not making any contributions.                                                                    
MR.  FLANAGAN replied  that generally  employers with  relatively                                                               
low rates of  unemployment are what determine it.   But they like                                                               
to be  reimbursable, he continued, and  the state is one  that is                                                               
reimbursable.   School districts  and public  employers generally                                                               
can elect to ...                                                                                                                
REPRESENTATIVE KNOPP inquired as to the cost to the state.                                                                      
MR. FLANAGAN responded that if  it were economical, he thinks the                                                               
state  would elect  to be  a contributory  employer as  generally                                                               
reimbursable is a better deal.                                                                                                  
MR. WELLER confirmed that Mr. Flanagan's response is correct.                                                                   
3:37:48 PM                                                                                                                    
REPRESENTATIVE  WOOL  stated  he   has  concerns  like  those  of                                                               
Representative Knopp.   He said he is in favor  of increasing the                                                               
payout above  what it was  before, but  that in his  own business                                                               
life  he has  sometimes encountered  people who  would prefer  to                                                               
collect unemployment  than to  work and they  tell him  that they                                                               
can come work  when their unemployment finishes.   While the bill                                                               
would provide a higher payout,  he continued, a person would have                                                               
to  make  more  money  to  get   more  money.    He  offered  his                                                               
understanding that  claims today are filed  electronically rather                                                               
than  in  person  and  inquired   whether  it  is  verified  that                                                               
claimants are seeking employment as is required.                                                                                
MR. FLANAGAN  answered yes and  said [the division]  does confirm                                                               
[that  claimants are  seeking employment].   [The  division] does                                                               
spot checks because it cannot  check everybody and routinely does                                                               
audits, he explained.   If someone says they  went to "so-and-so"                                                               
to  apply for  a job,  the division  will contact  "so-and-so" to                                                               
verify if  the person went.   The division does catch  people, he                                                               
continued, and  this is where  overpayments that the  division is                                                               
recovering  come  from.    Folks  collecting  unemployment  while                                                               
working under the  table are violating the law, he  added, and if                                                               
the  division finds  out about  it the  division will  pursue the                                                               
violator to  recoup the benefits plus  a 50 percent penalty.   In                                                               
egregious cases the  division will prosecute if  the division can                                                               
get a prosecutor to do so.                                                                                                      
3:39:40 PM                                                                                                                    
DENNIS  KNEBEL,  President,   Anchorage  Central  Labor  Council,                                                               
testified in  support of HB 142.   He stated that  the council is                                                               
an  organization of  unions that  represent employees  throughout                                                               
the Anchorage Bowl.  It exists  to serve the goals established by                                                               
its members and the council  believes that economic health of the                                                               
community  depends on  strong, vibrant  workforce.   He said  the                                                               
council demands  that a government  be responsive to  the people.                                                               
The council  requires folks  to participate  in the  community so                                                               
that every citizen  has the education and tools for  success.  He                                                               
reported that on  March 15, 2017, the  council unanimously passed                                                               
a resolution urging the Alaska  State Legislature to increase the                                                               
maximum  unemployment  benefit.   Alaska  ranks  forty-fourth  in                                                               
average weekly benefits,  currently at $252, he  pointed out, and                                                               
Alaska  significantly trails  the states  of Washington,  Oregon,                                                               
and California  in weekly unemployment  benefits.  Right  now, he                                                               
continued,  Alaska is  in an  economic downturn  and the  state's                                                               
laid  off skilled  workforce  needs financial  security.   To  be                                                               
successful  in the  community, local  employers  must maintain  a                                                               
skilled labor  pool to draw from  when the economy picks  up.  He                                                               
urged HB 142 be passed.                                                                                                         
3:41:30 PM                                                                                                                    
REPRESENTATIVE  WOOL  moved  to  report  CSHB  142,  Version  30-                                                               
LS0530\O,  Wayne,  4/6/17,  out   of  committee  with  individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no objection, CSHB 142(L&C) was reported from the House Standing                                                                
Labor and Commerce Committee.                                                                                                   
3:41:59 PM                                                                                                                    
There being no further business before the committee, the House                                                                 
Labor and Commerce Standing Committee meeting was adjourned at                                                                  
3:42 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB142 version O.pdf HL&C 4/12/2017 3:15:00 PM
HB 142
HB142 Supporting Document-Resolution FBCTC 3.29.17.pdf HL&C 4/12/2017 3:15:00 PM
HB 142
HB142 Additional Document-Letter Ed Flanagan 4.10.17.pdf HL&C 4/12/2017 3:15:00 PM
HB 142
HB142 Memo of Changes version D to version O 4.11.17.pdf HL&C 4/12/2017 3:15:00 PM
HB 142
HB142 Sectional Analysis version O 4.11.17.pdf HL&C 4/12/2017 3:15:00 PM
HB 142