Legislature(2007 - 2008)BELTZ 211

02/09/2008 01:30 PM Senate LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Bills Previously Heard/Scheduled
+= HJR 25 SUPPORTING RIGHT TO FORM LABOR UNIONS TELECONFERENCED
Heard & Held
+= SB 120 UNEMPLOYMENT COMPENSATION BENEFITS TELECONFERENCED
Moved CSSB 120(L&C) Out of Committee
           SB 120-UNEMPLOYMENT COMPENSATION BENEFITS                                                                        
                                                                                                                                
2:12:16 PM                                                                                                                    
CHAIR  ELLIS announced  SB 120  to  be up  for consideration.  He                                                               
recapped that they  had an entire year  of stakeholders' hearings                                                               
before  this  session on  this  issue,  and Governor  Palin  just                                                               
announced  some  stunningly good  news  for  employers about  the                                                               
rates over the next few years. It's  a really good time to make a                                                               
modest increase  in benefits, which  was his goal.  Last Saturday                                                               
the  committee had  a work  session  that resulted  in a  revised                                                               
committee substitute,  CSSB 120(L&C),  25-LS0622\L. He  asked Mr.                                                               
Owen to review it for the committee.                                                                                            
                                                                                                                                
2:14:08 PM                                                                                                                    
DANA OWEN, staff to Senator  Ellis, recalled that the previous CS                                                               
discussed  in the  Saturday work  session was  trying to  balance                                                               
some equities.  On one hand, the  unemployment insurance benefits                                                               
had not been changed in 10 years,  and the need to raise them was                                                               
widely recognized.  However, employers regarded  the unemployment                                                               
benefit  structure  as  costing  them more  than  it  needed  to.                                                               
Employer  groups offered  suggestions  about how  costs could  be                                                               
brought down for them.                                                                                                          
                                                                                                                                
The CS  they discussed on  Saturday attempted  to do that  in two                                                               
ways. First,  the CS  shifted about  $2-million of  tax liability                                                               
from employers over  to employees; an additional  cost savings to                                                               
employers  of approximately  $5.4  million was  found by  denying                                                               
benefits to employees  who had been fired  for misconduct. During                                                               
and  subsequent to  that meeting,  the  committee heard  vigorous                                                               
testimony  from labor  that denying  that benefit  would cause  a                                                               
greater hardship and would give  employers the incentive to abuse                                                               
the system by firing people for misconduct unjustly.                                                                            
                                                                                                                                
2:16:21 PM                                                                                                                    
They looked  for other ways to  retain the total of  $7.4 million                                                               
tax benefit to employers. Two  options were suggested; one was to                                                               
raise  the minimum  wage  in the  base period  that  it takes  to                                                               
qualify  for benefits.  Version L  deletes the  provision denying                                                               
benefits to those fired for  misconduct and retains the provision                                                               
shifting the tax  burden from employers to  employees by amending                                                               
the  percentages.   Currently  employers   pay  80   percent  and                                                               
employees pay  20 percent. Version  L changes that to  73 percent                                                               
paid for by employers and 27  percent paid for by employees. That                                                               
shifts an approximate aggregate of  $7 million from the employers                                                               
onto  the  employees.  Another  $.8 million  in  savings  to  the                                                               
employer was  found by  raising the  minimum amount  necessary to                                                               
qualify for benefits from $1000 to $2500.                                                                                       
                                                                                                                                
MR. OWEN said the savings of  $7.4 million in the previous CS for                                                               
the employer increased to $7.8 million in Version L.                                                                            
                                                                                                                                
2:18:28 PM                                                                                                                    
SENATOR STEVENS  asked him  to explain  raising the  minimum from                                                               
$1000 to $2500.                                                                                                                 
                                                                                                                                
MR. OWEN explained that current law  says you have to have earned                                                               
a  minimum of  $1000  in  each of  two  quarters  to qualify  for                                                               
benefits; the CS raises that minimum to $2500.                                                                                  
                                                                                                                                
CHAIR ELLIS  said updating the  $1000-minimum seemed like  a good                                                               
idea  to him  because it  was established  a long  time ago,  and                                                               
$2500  seemed  like  a  reasonable   figure.  He  explained  that                                                               
everyone thought that under the  suggested dismissal provision no                                                               
one would  be ever laid  off again.  They would be  dismissed for                                                               
conduct, and  the appeals  process is  a hassle  as well  as time                                                               
consuming.  That   seemed  to   be  a   show  stopper   for  this                                                               
legislation,  so  he  decided  to  leave it  out  and  give  more                                                               
significant  benefit  to   the  employers  without  significantly                                                               
impacting the employee.  He didn't know how he could  be any more                                                               
fair or impactful in a positive way to the employees.                                                                           
                                                                                                                                
MR. OWEN  said some  states raise the  minimum amount  to qualify                                                               
regularly with  either an escalator  clause or as a  routine, but                                                               
Alaska hadn't raised it since 1970.                                                                                             
                                                                                                                                
CHAIR  ELLIS said  if this  bill  passes, Alaska  would still  be                                                               
below  the middle  of the  pack  among other  states for  average                                                               
weekly benefits.                                                                                                                
                                                                                                                                
2:24:14 PM                                                                                                                    
PAULA SCAVARA, Special Assistant  to the Commissioner, Department                                                               
of Labor and  Workforce Development (DOLWD) said she  is also the                                                               
legislative liaison. She offered to answer questions.                                                                           
                                                                                                                                
CHAIR ELLIS asked her to  explain the 73/27 percent split between                                                               
employer  and employee  and trying  to save  money for  employers                                                               
without harming  anyone's interest  significantly. He  also asked                                                               
her  to  put the  cost  savings  into context,  especially  since                                                               
Governor  Palin announced  the system  was being  changed on  the                                                               
federal level to show savings anyhow.                                                                                           
                                                                                                                                
MS. SCAVARA deferred to Mr. Wilson for the answer.                                                                              
                                                                                                                                
2:25:18 PM                                                                                                                    
JAMES  WILSON,  Unemployment   Insurance  Actuary,  Research  and                                                               
Analysis Section,  Department of Labor and  Workforce Development                                                               
(DOLWD), said  over the last  few years Alaska has  been enjoying                                                               
lower-than-average tax  rates and  in the  last three  years they                                                               
have come  down significantly. Figures  from 2008 show  they were                                                               
the lowest employer  tax rates in 30 years.  Unemployment and the                                                               
cost  of the  program are  both at  low levels  and he  sees that                                                               
trend  continuing. He  said  the bill  attempts  to increase  the                                                               
maximum benefit  amount. The existing schedule  qualifies workers                                                               
for  an increased  benefit of  $2 per  each $250  increment; this                                                               
bill  adds additional  steps on  top of  that schedule.  The last                                                               
modest  benefit increase  was in  1997. He  said that  Alaska has                                                               
fallen further  down the ladder  in past  years at being  able to                                                               
replace  wages compared  to other  states. This  bill would  move                                                               
Alaska up more toward the center.                                                                                               
                                                                                                                                
2:29:31 PM                                                                                                                    
MR. WILSON  explained that  it increases  the benefit  maximum to                                                               
$370;  it also  increases the  cost  per worker  for the  average                                                               
employer from  $470 to $548.  It would  take until 2013  for that                                                               
cost to work  its way into the financing system,  a result of the                                                               
WBA increase.   The new CS dropped the  disqualifying issue. Also                                                               
the tax share was changed significantly  in the new CS from 80/20                                                               
employer/employee contribution to 73/27, a $7 million shift.                                                                    
                                                                                                                                
MR.  WILSON said  the proposal  to raise  the minimum  qualifying                                                               
wage from $1000 to $2500 was  a modest increase that would result                                                               
in $.8 million of savings,  an additional savings to the employer                                                               
of $5 per worker.                                                                                                               
                                                                                                                                
2:32:48 PM                                                                                                                    
SENATOR STEVENS asked how many  employees did not reach the $1000                                                               
minimum and how many won't reach the $2500 minimum.                                                                             
                                                                                                                                
MR. WILSON answered that approximate  1466 claimants were between                                                               
the $1000  and $250, and  he didn't have  a number for  those who                                                               
weren't able to reach the $1000 point.                                                                                          
                                                                                                                                
2:34:05 PM                                                                                                                    
CHAIR ELLIS  asked if the  department would get an  updated chart                                                               
on employer figures for the committee.                                                                                          
                                                                                                                                
MS.  SCAVARA replied  she  didn't  have enough  time  to put  the                                                               
charts together for  today, but she would have it  ready later in                                                               
the  week. She  asked  Mr.  Wilson to  comment  on  how much  the                                                               
employer pays now compared to the changes in the bill.                                                                          
                                                                                                                                
MR. WILSON  explained that under  the proposal, by 2013  the full                                                               
cost  of the  benefit increase  to  employers would  be $548  per                                                               
worker.  Factoring in  the change  of going  from 80/20  to 73/27                                                               
would  make that  go down  to $498.  The employee  portion alone,                                                               
with the  WBA increase by  2013, would  amount to $157,  which is                                                               
essentially what they  are paying currently. That would  go up to                                                               
$197. These numbers are before  factoring in the $.8 million that                                                               
would  result  from changing  the  minimum  qualifying wage  from                                                               
$1000 to  $2500. He  speculated it would  amount to  about $1/hr.                                                               
increase on the employee side.                                                                                                  
                                                                                                                                
CHAIR  ELLIS asked  Ms. Scavara  to "do  a commercial"  about the                                                               
confidentiality provisions  in this  legislation and  explain how                                                               
important it is for the state to comply with federal law.                                                                       
                                                                                                                                
MS.  SCAVARA responded  that sections  1-8 conform  state law  to                                                               
federal law; without  them, the state would be  sanctioned by the                                                               
U.S. Department of Labor for millions of dollars.                                                                               
                                                                                                                                
2:38:49 PM                                                                                                                    
SENATOR STEVENS  asked if  something is  happening on  a national                                                               
level  for people  who  are  fired for  misconduct  and if  other                                                               
states  successfully address  the  issue of  denying benefits  to                                                               
those people.                                                                                                                   
                                                                                                                                
2:40:09 PM                                                                                                                    
BILL KRAMER,  Chief, Unemployment Insurance, Department  of Labor                                                               
and  Workforce Development  (DOLWD), explained  that the  current                                                               
law puts  the responsibility on  the employer to show  that there                                                               
was  actually  misconduct in  connection  with  the work.  Simple                                                               
incompetence on the job does not  rise to misconduct and a worker                                                               
wouldn't be  denied benefits. Typically  an employer has  to show                                                               
that a policy  was explained and that the worker  understood it -                                                               
like for drinking or drugs or treating customers rudely.                                                                        
                                                                                                                                
He said  45 or 46  other states disqualify  benefits indefinitely                                                               
if someone is discharged for  misconduct in connection with their                                                               
work. The  person is  denied indefinitely or  until he  goes back                                                               
into the workforce and earns wages and gets laid off again.                                                                     
                                                                                                                                
Alaska's  current  statute  denies  benefits to  people  who  are                                                               
discharged  for misconduct  for six  weeks from  the date  of the                                                               
discharge. Their benefits  are reduced by three  times the weekly                                                               
benefit  amount,   and  they  are  ineligible   for  any  federal                                                               
extensions that may be available.                                                                                               
                                                                                                                                
SENATOR  STEVENS  commented that  this  bill  basically says  the                                                               
state is going  to deal with people who are  fired for misconduct                                                               
and that  will cost $5.4  million, but it  is going to  deny 1460                                                               
people benefits who  earn between $1000 and  $2500. Denying those                                                               
benefits saves $.8 million, but  the state is losing $5.4 million                                                               
by giving benefits to people  who have been fired for misconduct.                                                               
He wasn't sure this was where the state wants to go.                                                                            
                                                                                                                                
MS. SCAVARA said the department didn't draft this bill.                                                                         
                                                                                                                                
SENATOR STEVENS  asked her why the  misconduct language shouldn't                                                               
be deleted.                                                                                                                     
                                                                                                                                
MS. SCAVARA  replied that the  department is neutral on  the bill                                                               
after the  first 8 sections,  and it will follow  whatever policy                                                               
decisions the legislature makes.                                                                                                
                                                                                                                                
2:46:26 PM                                                                                                                    
SENATOR DAVIS said  she appreciated some things in  the bill, but                                                               
she also understood where Senator Stevens was coming from.                                                                      
                                                                                                                                
CHAIR ELLIS remarked  that this bill would not  change the status                                                               
quo for misconduct dismissal.                                                                                                   
                                                                                                                                
2:48:05 PM                                                                                                                    
VINCE BALTRAMI,  President, AFL-CIO, said  he was not  happy with                                                               
some of the  compromises in SB 120 because he  didn't want to see                                                               
anything that  was more  punitive to the  employees. He  saw some                                                               
punitive things in light of the  fact that the employers got such                                                               
a break  on their taxes.  However he supported this  bill because                                                               
he didn't think they could do much better at this point.                                                                        
                                                                                                                                
2:49:29 PM                                                                                                                    
REPRESENTATIVE HARRY  CRAWFORD said  sometimes it's hard  to tell                                                               
who  is at  fault when  someone  is fired.  He has  been fired  a                                                               
number of  times for his  union organizing activities.  And while                                                               
he got back wages  for it, they came two or  three years down the                                                               
road.  Other  states have  found  that  the misconduct  provision                                                               
gives  employers the  incentive to  fire people  when the  job is                                                               
almost  finished rather  than laying  them  off. Six  weeks is  a                                                               
pretty severe penalty  as it is, and he didn't  want the state to                                                               
go to  a longer  penalty and give  an unscrupulous  employer that                                                               
additional incentive to fire people.                                                                                            
                                                                                                                                
WAYNE STEVENS,  President/CEO, Alaska State Chamber  of Commerce,                                                               
said  he appreciated  all  the  efforts made  on  this issue.  He                                                               
pointed out that while the  rates have virtually stayed the same,                                                               
the taxable amounts  have increased every year  for the employer.                                                               
Since 1996  the taxable amount  to the employer and  the employee                                                               
has  gone from  $24,400 to  $31,300. He  said the  state is  in a                                                               
period of low unemployment, and  as a result the contributions to                                                               
the  trust fund  have gone  up. He  saw no  benefit to  employers                                                               
other than  that the draw on  the fund has been  reduced; so this                                                               
notion  that perhaps  employers are  getting an  unfair advantage                                                               
was  not correct.  He  encouraged  them to  make  SB 120  revenue                                                               
neutral, because he understood the need to make the change.                                                                     
2:54:30 PM                                                                                                                    
SENATOR STEVENS  moved to  adopt CSSB  120(L&C) version  L. There                                                               
were no objections and it was so ordered.                                                                                       
                                                                                                                                
2:55:01 PM at ease 3:03:06 PM                                                                                               
                                                                                                                                
3:03:10 PM                                                                                                                    
DENNY DEWITT, State Director,  National Federation of Independent                                                               
Business (NFIB),  commented that he appreciated  their efforts on                                                               
this issue  also. He  said the  NFIB has  not been  supportive of                                                               
employees being charged  more nationally, and this  moves more in                                                               
that  direction and  away from  eliminating benefits  for workers                                                               
discharged for  cause. He  wanted something  as close  to revenue                                                               
neutral  as  possible,  and appreciated  changing  the  $1000  to                                                               
qualify  for benefits  to  $2500.  In general,  he  said that  he                                                               
supported the direction in which the  bill was going, but he also                                                               
wanted to look  at it more closely and get  back to the committee                                                               
with a more coherent response.                                                                                                  
                                                                                                                                
3:05:06 PM                                                                                                                    
CHAIR ELLIS recapped and asked for further testimony.                                                                           
                                                                                                                                
3:05:58 PM                                                                                                                    
SENATOR  DAVIS  moved to  report  CSSB  120(L&C) version  L  from                                                               
committee  with   individual  recommendations  and   updated  and                                                               
attached fiscal notes.                                                                                                          
                                                                                                                                
SENATOR  STEVENS  said  he  didn't  object to  moving  it  on  to                                                               
Finance, and he  recommended that it would be  amended because he                                                               
was still concerned  about people being fired  for misconduct and                                                               
the  additional  1400  people  being  denied  benefits  who  make                                                               
between $1000 and $2500.                                                                                                        
                                                                                                                                
CHAIR ELLIS saw  no further discussion or objection  and the bill                                                               
moved from  committee. There  being no  further business  to come                                                               
before the committee, he adjourned the meeting at 3:07:40 PM.                                                                 

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