Legislature(2007 - 2008)
03/12/2008 02:57 PM Senate FIN
| Audio | Topic |
|---|---|
| Start | |
| SB289 | |
| SB260 | |
| SB120 | |
| SB246 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 120
"An Act relating to the calculation and payment of
unemployment compensation benefits; and providing for
an effective date."
SENATOR JOHNNY ELLIS, sponsor, explained the intent of the
bill. He reported that the bill is a result of a year-long
stakeholders process conducted in the Senate Labor &
Commerce Committee. There were numerous work sessions with
business groups, labor advocates, Department of Labor
experts, staff, and committee members.
Senator Ellis pointed out that a healthy unemployment
insurance system benefits all Alaskans. It provides a shock
absorber for businesses, individuals and families hit by
economic change. It helps both businesses and workers.
Alaskan workers stay in Alaska, ready for jobs when business
picks up. Employers maintain a stable, ready pool of
experienced workers.
Senator Ellis reported that Alaska's unemployment insurance
system has been soundly managed. It has never depleted its
trust fund. Other states have depleted their trust funds
during time of economic stress. Alaska's system has always
been able to maintain payments, even during the severe 1986
oil price crisis.
Senator Ellis emphasized another important consideration -
wage replacement. The unemployment insurance system seeks
to replace roughly 50 percent of lost wages, a goal
repeatedly confirmed by presidents and commissions over many
decades in the United States. Alaska's wage replacement
rate is dead last among all states. It was 25.8 percent in
2005 and is likely to be even lower today.
Senator Ellis pointed out that Alaska's benefit amount has
fallen far behind wages. The maximum weekly benefit amount
of $248 is the fourth lowest in the nation. Alaska's
maximum weekly benefit amount has not been adjusted since
1997. Eligible wages are capped at $26,500. One third of
Alaskan wage earners earn that much or more, but are limited
to $248 in weekly benefits.
Senator Ellis reported that tax rates are low. Now is the
time to raise the benefit amount. Alaska's 2008
unemployment insurance tax rates for employers are the
lowest in 28 years. There is room to raise the benefit -
the $370, which represents a restrained, compromised weekly
benefit amount. CSSB 120 (L&C) would raise the average
employer cost $25 per employee from the 2008 level. The
total out-of-pocket cost to employers would remain $89 below
2007 level. The employee cost will rise $37 per year over
the 2008 amount.
4:16:09 PM
Senator Ellis said the Senate Labor & Commerce version
represents a compromise. Benefits need to be raised.
Employers view the system as too costly. The bill shifts
costs from the employers to employees. Currently employers
pay 80 percent, employees 27 percent. Under the bill,
employers would pay 73 percent and employees would pay 27
percent. Alaska is one of only two states that actively
mandate employee contributions. New Jersey is the other
one. New Jersey's maximum weekly benefit is $536; Alaska's
is $248. The bill would raise it to $370.
Senator Ellis explained that the bill includes an automatic
inflation proofing mechanism. It will help to avoid having
to address the issue every year.
4:19:17 PM
Senator Ellis stressed that Alaska must enact the
confidentiality statutes. The first eight sections of the
bill are confidentiality related. Federal law requires all
states to protect unemployment insurance data by October
2008. Failure would mean the loss of $19.1 million in
federal funds to the state. Alaska businesses would pay an
additional $87 million in taxes if the statutes are not
updated in regards to confidentiality.
4:20:55 PM
DANA OWEN, STAFF, SENATOR JOHNNY ELLIS, explained a handout
entitled "The Case for Raising Alaska's Unemployment Benefit
Amount" (copy on file.) He highlighted page 1,
"Unemployment Insurance Maximum Weekly Benefit Amount by
State," which illustrates where Alaska's weekly benefit
th
falls in relation to other states. Alaska is 48. New
Jersey, a state that has an employee contribution to the
unemployment insurance tax system, is third from the top.
Mr. Owen discussed page 2, "Alaska's Maximum Weekly Benefit
- Unemployment Insurance 1966 - 2006." This stair step
chart illustrates the history of raises in the unemployment
insurance benefit amount. The rate of $248 was achieved in
1997. This is the longest stretch, since 1966, of not
raising rates.
Mr. Owen interpreted the table on page 3, "Alaska's
Unemployment Insurance - Weekly Benefit Amount Schedule."
This chart shows the effect of the 1997 amendment and the
range of amounts earned under the unemployment insurance
system.
Mr. Owen reported that page 4, "Alaska Unemployment
Insurance - Recipients by Weekly Benefit Amount, 2000." It
illustrates that the largest portion of unemployment
insurance recipients are maxed out at $248 weekly benefit.
Mr. Owen explained the graph on page 5, "Average Wage
Replacement Rates - By State, 2005". Alaska is at the
bottom of the list.
4:23:05 PM
Mr. Owen depicted "Replacement Rates - Western States, 2005"
on page 6. He pointed out that Alaska is the lowest at 25.8
percent.
Mr. Owen showed on page 7 how "The Target Gets Farther Away
- Alaska, 1987 to 2007." The amount of benefit diminishes
in relation to the amount of wage it replaces.
Mr. Owen discussed the "Average Weekly Benefits Amount
(AWBA) as a Percentage of Average Weekly Earnings - 2006."
Mr. Owen noted that the chart on page 9, the "Estimated
Annual Unemployment Insurance Employee Tax Cost with Maximum
Weekly Benefit Amount Increased, Tax Share Ratio Changed,
and Minimum Qualifying Wage Raised, Effective January 2009,"
is what is presented in the Labor and Commerce version of
the bill. The employee rate would increase from $157 to
$194 by the time the rate phases in, in 2013. This is a $37
increase in the employee payment. The graph on page 10
depicts "Estimated Annual Cost per Worker for Average
Employer with Unemployment Insurance Maximum Qualifying Wage
Raised, effective January 2009. In 2007 the estimated
annual cost per worker for the average employer was $584.
In 2008 that number drops dramatically to $470. It
continues to decline until 2010 when the effect of SB 120
comes into play. When it is fully in effect in 2013, the
cost of $495 is still below what employers were paying last
year.
4:25:49 PM
Senator Ellis pointed out that business groups requested
that this bill be phased in. He summarized that the bill is
long overdue, is a reasonable well-crafted compromise, and
is nearly cost neutral. This is the right time; the rates
are the lowest in 28 years. It is a reasonable compromise.
4:27:22 PM
DAVID RUIZ, MEMBER, LABORERS UNION 341, Anchorage, testified
in support of SB 120.
LARRY BRINK, ANCHORAGE, testified in support of SB 120.
ELSA BILLINGHAM, ANCHORAGE, testified in support of SB 120.
She shared a personal story regarding unemployment benefits.
WAYNE STEVENS, PRESIDENT, ALASKA STATE CHAMBER OF COMMERCE,
testified in support of SB 120. He included a letter of
support in the members' packets (copy on file.)
4:36:18 PM
Senator Elton referred to the chart that looks at past costs
of the employee to the employer. The bill reflects a
savings to the employer. He wondered if the figures were
inflation adjusted. Mr. Stevens said he did not know.
Mr. Owen thought they were nominal dollars and did not
include adjustment for inflation. Senator Elton concluded
that the savings to the employer are even greater.
4:38:34 PM
TOM BRICE, AGENT, ALASKA DISTRICT COUNCIL OF LABORS,
testified in support of SB 120. He mentioned a concern
about the perception that the employee will have to buy the
increase, going from 20 percent to 27 percent.
DON ETHERIDGE, ALASKA AFL-CIO, testified in support of SB
120.
4:40:38 PM
Co-Chair Stedman asked if anyone opposed the bill.
Senator Ellis reported that the National Federation of
Independent Businesses included a letter in the members'
packets which stated opposition to the bill. There are
others that don't believe in unemployment insurance or that
it should be paid 100 percent by the employer. He shared
discussions regarding the phase-in aspect of the bill.
Co-Chair Stedman asked how long the groups worked on the
bill. Mr. Owen said about a year. Senator Ellis added that
he has received a letter from AGC stating some support for
the bill.
SB 120 was heard and HELD in Committee for further
consideration.
AT-EASE: 4:44:40 PM
RECONVENE: 4:47:56 PM
| Document Name | Date/Time | Subjects |
|---|