Legislature(1993 - 1994)
04/13/1993 09:30 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 162: An Act relating to the implementation of the federal emergency unemployment compensation program; making changes relating to unemployment compensation under the extended benefits program and the supplemental state benefits program; and providing for an effective date. Co-chair Peace announced that SB 162 was before the committee. SENATOR TIM KELLY voiced his support of the bill but asked for clarification in terms of state dollars. Co- chair Pearce invited Jim Coate, Unemployment Insurance Program Manager, Division of Employment Security, Department of Labor, and Judy Knight, Director, Division of Employment Security, to join the members at the table and speak to the bill. JUDY KNIGHT said that SB 162 did three main things. It would allow the state to continue its participation in the emergency unemployment compensation program which Congress has enacted and amended for the fourth time. Prior legislation allowed the department to participate in that program and the participation was limited to two years, ending December 1993. Currently Congress has extended the program to pay benefits through the middle of January 1994. Secondly, the other provisions allow the state law to conform with federal law in the extended benefits program (changes made last year by Congress). The third item is an optional trigger allowing the department to pay the extended benefits program when the employment rate reaches a certain level. She explained emergency unemployment compensation is financed 100 percent by federal revenues. It is being paid because of high unemployment throughout the nation. When an individual becomes unemployed, they first draw regular benefits for 16 to 26 weeks, and during a period of high unemployment, they may be eligible for extended benefits. Since Congress passed the emergency unemployment compensation program, we have bypassed the extended benefit program and used the federal program. Senator Kelly asked which fund would pay those extended benefits. Ms. Knight said that in Alaska, like other states, there is an unemployment insurance trust fund. Employers and employees are taxed and the money goes into that fund. Regular unemployment benefits are paid out of that fund. Emergency unemployment compensation is drawn from the U.S. Department of Labor fund. Senator Kelly asked if the state fund had a surplus. Ms. Knight said that there was not a surplus but a sufficient balance to maintain solvency. This balance was equal to 3 percent of the state's total wages. She explained, in case of a severe recession, employers' taxes would not have to be increased to maintain solvency of the fund. JIM COATE said that the formula that determines tax rates has what is called a solvency adjustment. That solvency adjustment is both positive and negative. As the balance in the trust fund gets too large, by formula, a negative tax is applied to the overall tax rate, reducing it. It is an automatic and controlled balance. Senator Kelly asked if SB 162 would pass this session, how much federal money would be distributed throughout Alaska. Ms. Knight said that over $100 million had already been paid out since the state started the emergency unemployment compensation program. It is expected that an additional $40 million would be paid out between now and January 1994. Ms. Knight said that the state would save approximately $20 million in the coming year because claims would be paid under the emergency program and not under the state's extended program. There are other provisions that the state must pass to coincide with federal law. If the state does not pass these statutes to meet federal law, then the Secretary of Labor, through a hearing process could find the state out of compliance, and the state would lose administrative funds. The administrative funds are all the federal employment and training dollars that come into the state. Those funds come from the U.S. Department of Labor for administrative costs for unemployment insurance, the employment service and training partnership. In answer to Senator Kelly, Mr. Coate said that the statute changes in order to come into federal compliance would not cost any state dollars. However, the six weeks of benefits that the state would not be able to pay, if SB 162 does not pass, would be a loss of about $1.5 million to the state. The danger is that federal law mandates extended benefits be paid through January 15, 1994, and state law would stop payments in the first part of December 1993. The compliance issue with the federal government could cost the state $25- 30 million in administrative funds that are expected to come into the state to pay for the administrative part of the three programs. Ms. Knight said that the Labor and Commerce Committee had requested an amendment that would repeal the emergency compensation provisions and that was provided to the committee as amendment 1. Senator Kelly MOVED amendment 1. No objections being heard, amendment 1 was ADOPTED. Discussion was had by Mr. Knight and Senator Kelly regarding additional costs to the state regarding the extended compensation. Senator Kerttula MOVED for passage of CSSB 162(FIN) as amended from committee with individual recommendations. No objections being heard, CSSB 162(FIN) as amended was REPORTED OUT of committee with a "do pass," and a zero fiscal note for the Department of Labor. Co-chairs Frank and Pearce, Senators Kelly, Rieger, and Kelly voted "do pass." Senators Jacko and Sharp were absent from the meeting and did not sign.