Legislature(2017 - 2018)BELTZ 105 (TSBldg)
04/10/2018 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB301 | |
| HB142 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 301 | TELECONFERENCED | |
| + | HB 142 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 142-UNEMPLOYMENT INSURANCE BENEFITS
2:02:05 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of HB 142. [CSHB 142(FIN) was before the
committee.]
2:02:22 PM
REPRESENTATIVE CHRIS TUCK, Alaska State Legislature, Juneau,
Alaska, sponsor of HB 142, thanked the committee for hearing the
bill that improves unemployment insurance. He said his staff
would provide the introduction and sectional analysis and he
would follow up talking about the economic benefits.
2:02:42 PM
KENDRA KLOSTER, Staff, Representative Chris Tuck, Alaska State
Legislature, Juneau, Alaska, introduced HB 142 speaking to the
following sponsor statement:
The Alaska Department of Labor's Unemployment
Insurance (UI) program provides unemployment benefits
to eligible workers who become unemployed through no
fault of their own, working less than full-time, and
meet certain other eligibility requirements. With the
seasonal nature of much of the state's workforce and
Alaska's vast remoteness, UI benefits serve not only
to bridge the economic gap for the individual worker,
but also as a stabilizing influence on local
economies.
The current Maximum Weekly Benefit Amount (MWBA) of
$370 only replaces 36% of the state's average weekly
wage of $1,020. An MWBA of $510 would provide 50% wage
replacement of the average weekly wage, a nationally
recognized norm.
To compare to other western states, the MWBA rate in
Washington is $681, Oregon is $590, and California is
$450. In addition, Alaska is one of only three states
where the cost of providing UI benefits is shared by
employers and employees.
House Bill 142 would increase the maximum weekly
benefit amount under the UI Program in two steps from
the current $370 to $458 in 2018 and to $510 in 2019.
Among 50 states, the District of Columbia, and Puerto
Rico, Alaska is:
• 39th in Maximum Weekly Benefit Amount
• 44th in Average Weekly Benefit Amount ($252)
• 52nd in Wage Replacement Ratio (.288)
• 9th in Recipiency Rate (unemployed workers
receiving benefits - .37)
As a claimant filing for UI benefits, individuals are
responsible for actively seeking suitable fulltime
employment and reporting activity for seeking
employment each week to remain eligible.
The federal poverty level for a family of three in
Alaska for 2016 is $25,200, or $2100 a month. An
unemployed single parent with two dependent children
receiving the MWBA of $370 plus the dependent child
allowance of $24 per child under 18 (up to a maximum
of three) receives approximately $1800 per month in UI
benefits.
By passing House Bill 142, Alaska will be more in-line
with the average weekly benefits and provide the
necessary financial support families need to survive
while seeking employment.
2:04:24 PM
MS. KLOSTER delivered a sectional analysis of HB 142 speaking to
the following prepared document:
Sectional Analysis for HB 142 version R
Increase to Alaska's Unemployment Insurance Maximum
Weekly Benefit Amount
Increases the state's maximum weekly benefit amount
(WBA) from $370 to $510 and increases the qualifying
wage scale from $42,000 to $59,500. After the initial
increase to $510, future benefit increases are tied to
an economic indicator based on the state's average
weekly wage (AWW). Increases to the WBA shall not
exceed 50% of the states average weekly wage from the
prior calendar year.
Section 1: AS 23.20.350(d) Amends the benefit
schedule by increasing the maximum qualifying wage
requirement from $42,000 to $59,500. The qualifying
wage schedule is extended in $250 increments to reach
the new maximum qualifying amount. The benefit
schedule is extended in $2 increments for each
additional $250 of qualifying wages to reach a new
maximum weekly benefit amount of $510.
Section 2: Amends AS 23.20.350 by adding new
subsections:
(h) Annually, after December 31, 2020, authorizes
the Department to increase the highest WBA for
individuals earning at least $59,750. The new WBA
calculation shall amend the highest base period
wages in $250 increments and the highest WBA in
$2 increments if the state's average weekly wage
increases. The new maximum WBA shall not exceed
50% of the average weekly wage.
(i) Provides for public notice of any new benefit
amounts calculated under (h) by December 1 of
each year by posting a notice on the Alaska
Online Public Notice System and allows for public
comment on the accuracy of the Department's
calculations.
New maximum WBAs apply to benefit years
established on January 1 of each year and does
not change existing claims.
Changes to the WBA shall be calculated only once
per year.
(j) Establishes the calculation procedure for
determining Alaska's average weekly wage by
December 1 of each year. The average weekly wage
is determined by dividing the average annual wage
in the state for the preceding 12-month period
ending June 30 by 52. The state must include
wages of all employees in the state covered by
this chapter, both public and private. If the
calculation does not result in whole dollars, the
amount shall be rounded down.
Section 3: Provides for an effective date of January
1, 2019.
MS. KLOSTER related that the sponsor believes this is the right
time to increase unemployment insurance benefits. There is an
economic downturn and Alaskans need help to ensure that they can
pay the mortgage and put food on the table. Testimony in other
committees demonstrated that it's been hard to take care of
families when the UI benefits are so low. She advised that
individuals from DOLWD were available to answer any questions
the committee may have.
2:06:23 PM
REPRESENTATIVE TUCK provided information on the economic
benefits of always having unemployment insurance and
specifically when there is a downturn in the economy. A study by
the Columbia Business School titled The Importance of
Unemployment Insurance as an Automatic Stabilizer found that
unemployment insurance acts as an automatic stabilizer to the
economy. The more generous the unemployment insurance benefits
are, the better the region fairs overall." The research explains
that "as demand for products and services decline due to
unemployment, unemployment insurance allows for continual cash
flow in the community." Further, the Congressional Budget Office
reports that every dollar that is invested into unemployment
insurance nationwide, contributes to about 19,000 new jobs. By
comparison, a dollar in tax cuts creates just 10,700 jobs. He
explained that unemployment insurance creates more jobs because
people spend all the money received from unemployment insurance,
whereas someone who is employed and receives that dollar from
tax credits won't spend the whole dollar. Just part of that
dollar goes into the economy; the rest is to pay off a mortgage,
to pay down debt, put in savings or something else. He
reiterated that a benefit of unemployment insurance is as a
stimulus to the economy. Research indicates the return per
dollar invested can be as high as $2.15. The reason is that when
people purchase groceries, it keeps agriculture workers, truck
drivers, grocery store workers, and others employed.
REPRESENTATIVE TUCK argued that paying reasonable unemployment
insurance benefits also helps to keep skilled, seasonal workers
in Alaska. Alaska is among the highest in the nation for
seasonal work and the cost of living is very high. Once a worker
moves out of the state, it's difficult to get them back,
particularly when the Lower-48 economy is doing well, and
unemployment insurance is higher. A worker in Washington state
who loses his/her job will receive almost 70 percent more than
the UI benefits in Alaska.
He shared that the Federal Reserve commented that unemployment
insurance is the best economic stimulus package a state can
offer. It is better than infrastructure investment for mass
transit because the money immediately goes into the economy.
Former Federal Reserve Chair Ben Bernanke said the unemployment
insurance benefits program spurs growth and creates jobs.
CHAIR COSTELLO noted who was available from DOLWD to answer
questions.
2:11:04 PM
SENATOR MEYER asked what the UI benefits would be today if a
COLA had been in effect in 2009 when the benefits were last
raised.
REPRESENTATIVE TUCK deferred the question to Lennon Weller and
advised that HB 142 would increase the maximum weekly benefit
amount (WBA) to $510.
2:12:17 PM
At ease
2:12:40 PM
CHAIR COSTELLO reconvened the meeting.
SENATOR MEYER asked if $510 was a reasonable weekly benefit
compared to a cost of living allowance (COLA) applied to the
2009 benefit.
2:13:07 PM
LENNON WELLER, Economist and Actuary for the Unemployment
Insurance System, Research and Analysis Section, Department of
Labor and Workforce Development, Juneau, Alaska, advised that
the two amounts are roughly aligned. The calculation shows that
for calendar year 2018, the maximum benefit would be $506.
SENATOR MEYER asked the derivation of the $510 value.
MR. WELLER explained that when the bill was originally drafted,
it was 50 percent of the average annual wage. The basis was
state fiscal year 2016 wages and employment.
SENATOR MEYER asked if there was a surplus or deficit in the
Unemployment Insurance Trust Fund.
MR. WELLER said that as of February, the fund balance was $442.7
million. More importantly, that corresponds to a 3.64 percent
reserve ratio. The goal is to have a reserve ratio of between 3
percent and 3.3 percent to handle increased benefit loads.
"Right now, we have what we would consider full solvency, he
said.
SENATOR MEYER observed that Alaska is one of just three states
where both employers and employees contribute to the
unemployment insurance program. He asked if employers are the
sole contributors in the other 47 states.
MR. WELLER said yes.
SENATOR MEYER asked if the sponsor agrees with that and
questioned whether the employer should be the sole payer.
2:16:53 PM
REPRESENTATIVE TUCK said he would like Alaska to be more like
the other states, but it's important to put this money in the
economy now rather than getting bogged down with too many fixes
at one time. Right now, the bill increases the WBA to DOLWD's
recommended level and implements an automatic mechanism.
2:18:06 PM
CHAIR COSTELLO asked for an explanation of the actual weekly
payout.
REPRESENTATIVE TUCK directed attention to the chart of numbers
on page 7. He explained that the numbers continue the
calculation in existing statute. For every $250 increase in
annual earnings for an employee, the weekly benefit increases
$2. Under the bill, the maximum weekly benefit is $510. Under
current statute the calculation stops at the maximum annual wage
of $42,000. That benefit would be $370. Anyone making more than
$42,500 would still only receive $370. HB 142 increases the
maximum base wage calculation to $59,500.
CHAIR COSTELLO asked if he had run any economic modeling to
determine the impact the bill would have on the fund.
MR. WELLER said the economic modeling on the cost impact of this
increase goes through 2024.
CHAIR COSTELLO asked him to share that information with the
committee.
MR. WELLER advised that HB 142 brings costs back to the long-
term goals where financing of the system tends to be more
reactive and functional. Increases won't begin to go into effect
for the average rate class until 2021. At that point the maximum
cost per employee is projected to increase from $70 to $139 in
2022 and to $222 in 2023 before falling back to a difference of
$185 over the baseline cost expectations at the average tax
rates for tax classes 10 and 11.
MS. KLOSTER added that the packets have some charts that would
help with the explanation.
CHAIR COSTELLO asked, if the bill were to pass as written, would
the highest change be to the $510 per week or would that amount
go up over time.
MR. WELLER advised that very little change is expected in the
average annual wage through 2024. As a result, the maximum
weekly benefit amount is not expected to change through 2024.
CHAIR COSTELLO asked for an explanation of the language in
subsection (h) on page 9, lines 13-17.
2:26:06 PM
REPRESENTATIVE TUCK replied that is the automatic adjustment
factor that is based on the average annual wages of Alaskans.
What Mr. Weller was relating is that DOLWD expects wages to be
stagnant for a while, so unemployment insurance benefits are not
going to increase either. If there was a sudden spike in the
economy and wages went up proportionally, unemployment insurance
would also go up because it's factored on 50 percent of the
average annual wage. That is the calculation in Section 2.
Thirty-six other states use that same calculation, one state
uses less than 50 percent and some states use as high as 60
percent of the average annual wage.
2:27:33 PM
CHAIR COSTELLO observed that Section 2 has new subsections and
asked if this is a new adjustment.
REPRESENTATIVE TUCK confirmed that was correct.
CHAIR COSTELLO observed that the system is currently static.
MS. KLOSTER agreed.
2:27:58 PM
CHAIR COSTELLO opened public testimony on HB 142.
2:28:14 PM
RYAN ANDREW, International Brotherhood of Electrical Workers
(IBEW) Local 1547, Anchorage, Alaska, stated he was speaking in
support of HB 142. He pointed out that there hasn't been an
increase in the unemployment benefit since 2009, that Alaska
th
ranks 37 in the nation for maximum weekly benefit, and it ranks
dead last on the wage replacement ratio. He said Alaskan workers
employed in industries like construction rely on unemployment
benefits to carry them through the winter when construction work
isn't readily available. The cost of living is high in Alaska
and $370 a week isn't enough. The proposed increase would
benefit both employees and employers. It would be a direct
benefit to employees and an indirect benefit to employers by
retaining a skilled workforce. The economy on the West Coast is
booming and there is no economic reason for a skilled worker to
return to Alaska once they've made the decision to seek
employment elsewhere. He said the IBEW apprenticeship program
invests 4-5 years and between $20,000 and $30,000 to train an
apprentice and it's a blow to lose those workers to the Lower-
48. Increasing the benefit would encourage workers to remain in
Alaska, even when the economy is slow. He said it's also
important to point out that paying for unemployment benefits is
a shared burden.
2:31:32 PM
SERGIO ACUNA, representing self, Anchorage, Alaska, said he's
been a construction worker for over 22 years and is speaking in
support of HB 142. This much-needed increase will help
unemployed workers and their families while they look for
another job.
2:33:46 PM
DOUG TANSY, President, Fairbanks Central Labor Council,
Fairbanks, Alaska, stated support for HB 142 and asked the
committee to consider the social factors that come into play
when workers and their families are stretched beyond their means
to extend debt. He emphasized that hard-working Alaskans deserve
a bill like HB 142.
2:34:43 PM
LAKE WILLIAMS, President, Fairbanks Building Trades and district
representative for the International Union of Operating
Engineers (IUOE), Local 302, Fairbanks, Alaska, advised that the
resolution he introduced on behalf of the Fairbanks Building
Trades in support of HB 142 should be in members' packets. He
said his members are relying on unemployment insurance benefits
more than ever to make payments and feed their families until
the next job is available. This year between 300 and 400 people
were on the out-of-work list hoping to go to the North Slope but
the jobs were not available. He said another problem is that
competition from the Lower-48 is causing some of Alaska's
skilled workforce to relocate out of state. They generally don't
come back, but some become transient workers who return to get a
paycheck then go back to their new state of residence and spend
their money there. He opined that increasing the UI benefits
will help curb this situation. He urged the committee to pass HB
142 and send it to the governor.
2:37:04 PM
DON ETHERIDGE, Lobbyist, Alaska AFL-CIO, Juneau Alaska, stated
strong support for HB 142 and requested the committee move it
on. He related that during the last economic downturn the local
labor union lost over 50 percent of its membership to
Washington, Oregon, and Nevada. Once the economy recovered the
union spent millions of dollars retraining a workforce. Passing
HB 142 will help prevent that situation from recurring.
2:38:23 PM
BARBARA HUFF-TUCKNESS, Director of Government and Legislative
Affairs, Teamsters Local 959, Anchorage, Alaska, said she would
not reiterate the excellent testimony on HB 142, but she would
remind members that the unemployment insurance, like health,
fire, and home insurance, provides a cushion when there is an
unexpected economic situation that folks either aren't prepared
for or their savings can't cover. Without that cushion many are
forced to leave their community and/or state. She referenced
Senator Meyer's comment and advised that she has never heard a
member complain about the contribution they make towards the
unemployment insurance fund. She said she supports employees and
employers both contributing to this important insurance fund.
She urged support for the passage of HB 142.
2:40:02 PM
ANTHONY LADD, Iron Workers Local 751, Anchorage, Alaska, stated
support for HB 142. He said it's an understatement to say that
an iron worker's job in Alaska is seasonal. He shared that in
earlier years he was forced to fly south to look for work during
the off season to be able to support his four kids. He currently
trains apprentices and sees the work and money that goes into
training the workforce in Alaska. He opined that when they are
laid off in the winter they'll do nothing but leave and get
their unemployment somewhere else.
2:41:45 PM
RODNEY HESSON President, Juneau Building and Trades Council,
Juneau, Alaska, said the skilled trades workforce in Alaska is
particularly hard hit now because members are not only
relocating to find work but many are also retiring at an
accelerated rate. He said it takes five years to train an IBEW
apprentice and for them to leave the state as journeymen and
possibly never return is expensive and problematic. We need to
keep our workers here in the state, he said.
2:43:05 PM
CHAIR COSTELLO closed public testimony on HB 142.
SENATOR GARDNER commented that she's come to realize that the
bill has a broader impact than just protecting the families of
people who are temporarily unemployed. It also addresses keeping
seasonally or temporarily unemployed workers in Alaska as part
of a skilled workforce.
SENATOR MEYER asked for an explanation of how a worker qualifies
for unemployment insurance benefits.
2:44:40 PM
MR. WELLER explained that to qualify for UI benefits a worker is
required to work in multiple quarters and must earn at least
$100 in a quarter outside the primary quarter of earnings. The
size of the benefit is assessed according to the individual's
base period wages. That is the first four of the most recent
five completed calendar quarters. Seasonality of the wages
impacts the duration of the benefit.
SENATOR MEYER asked if individuals who come to Alaska to work in
seafood processing plants would qualify for benefits once the
work ends and they leave Alaska.
MR. WELLER said yes if they meet the strict requirements. They
must earn at least $2,500 in wages and at least $100 must be in
a quarter outside the primary quarter of earnings. They must
also meet the requirements of being able and available for work.
SENATOR MEYER noted the letters in the bill packet from small
businesses that are opposed to HB 142. He questioned the
opposition if the UI increases would be healthy for the economy.
MR. WELLER replied it's understandable that employers are
concerned about the increased costs and payroll taxes, but it's
important to keep in mind that employers that have relatively
stable payrolls will receive a tax rate that is much lower on
average. He said it's also important to understand that there is
parity established within the unemployment insurance financing
system.
2:49:44 PM
REPRESENTATIVE TUCK quoted the Federal Reserve Bank of Minnesota
that said,
Despite years of research, the economic effects of
unemployment benefits are poorly understood. While
intuition might suggest that providing financial aid
to people who lose their jobs would discourage them
from seeking new jobs, recent research has found that
extending benefits has little effect at the individual
level.
One of the reasons is that the opportunity cost is low. When one
goes from unemployed to employed, they are willing to give up
unemployment insurance to get full employment. This is unlike
someone who is considering opening a restaurant where the
opportunity cost is high. Those high opportunity costs might
prevent someone from making the investment.
He said the solution to unemployment is creating new jobs. The
federal reserve also says that UI adds to the overall demand and
overall employment over what otherwise would have been if there
had been no unemployment insurance at all. It's during those
periods of economic weakness that UI keeps money circulating in
the economy. He said some business groups oppose the bill due to
the misunderstanding of how unemployment insurance benefits
affect the economy. Some people look at it as paying people to
sit at home but that hasn't been the case.
SENATOR MEYER questioned how raising the unemployment insurance
benefits would help the oil industry be more profitable.
REPRESENTATIVE TUCK agreed it would not help that industry
unless it maintained its workforce in Alaska.
SENATOR MEYER commented on the importance of maintaining a
skilled workforce in Alaska.
2:53:02 PM
CHAIR COSTELLO thanked the sponsor and stated she would hold HB
142 in committee.