03/23/2001 03:20 PM House L&C

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled

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ALASKA STATE LEGISLATURE HOUSE LABOR AND COMMERCE STANDING COMMITTEE March 23, 2001 3:20 p.m. MEMBERS PRESENT Representative Lisa Murkowski, Chair Representative Andrew Halcro, Vice Chair Representative Kevin Meyer Representative Pete Kott Representative Norman Rokeberg Representative Harry Crawford MEMBERS ABSENT Representative Joe Hayes COMMITTEE CALENDAR HOUSE BILL NO. 58 "An Act relating to the calculation and payment of unemployment compensation benefits; and providing for an effective date." - HEARD AND HELD PREVIOUS ACTION BILL: HB 58 SHORT TITLE:UNEMPLOYMENT COMPENSATION BENEFITS SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR Jrn-Date Jrn-Page Action 01/16/01 0089 (H) READ THE FIRST TIME - REFERRALS

01/16/01 0089 (H) L&C, FIN

01/16/01 0089 (H) FN 1: ZERO(LWF)

01/16/01 0089 (H) FN 2: (ADM/VARIOUS DEPTS)

01/16/01 0089 (H) WITNESS REGISTER REBECCA NANCE GAMEZ, Deputy Director Department of Labor and Workforce Development (DLWD) P.O. Box 21149 Juneau, Alaska 99802-1149 POSITION STATEMENT: Testified on ACTION NARRATIVE TAPE 01-39, SIDE A Number 0001 CHAIR LISA MURKOWSKI called the House Labor and Commerce Standing Committee meeting to order at 3:20 p.m. Representatives Murkowski, Halcro, Meyer, and Crawford were present at the call to order; Representatives Kott and Rokeberg arrived as the meeting was in progress. HB Number 0046 CHAIR MURKOWSKI announced that the committee would hear HOUSE BILL NO. 58, "An Act relating to the calculation and payment of unemployment compensation benefits; and providing for an effective date." CHAIR MURKOWSKI stated that the committee had asked the Division of Employment Security for additional information, which was received on 3/15/01; and she mentioned that there was a revised fiscal note. Number 0139 REBECCA NANCE GAMEZ, Deputy Director, Department of Labor and Workforce Development (DLWD), explained the three things the bill does: it raises the maximum weekly unemployment insurance ("UI") benefit amount from $248 to $284 the first year; then it raises it from $284 to $320 a week in the second year; and then it ties it to the average weekly wage, which will allow the maximum weekly benefit amount to "flow" with the economy. MS. GAMEZ commented that 35 states have economic indicators attached to their maximum weekly benefit amounts. [The DLWD] comes before this committee every four to six years, and tying this to the average weekly wage would change that; this would become a flexible rather than a static number in law. CHAIR MURKOWSKI asked for confirmation of her understanding that it doesn't make a difference whether a person is a claimant from Alaska or from Ohio: if a person worked in Alaska and has been laid off, the claim can be made [against Alaska]. MS. GAMEZ responded affirmatively; however, she added that the reverse is true as well. A person can work in Ohio, come to Alaska, and file a wage claim against Ohio, which is why it is part of a larger national system. MS. GAMEZ stated that [the department] was found out of compliance many years ago when out-of-state people used to be given a $20 bill and in-state people were given considerably more. CHAIR MURKOWSKI commented that if a person is working in Alaska, and Alaskan benefits are going to be claimed, that person ought to be at least making the claim here in Alaska before moving to Ohio. Number 0446 REPRESENTATIVE HALCRO, referring to the handout entitled "Answers to House Labor and Commerce Committee Questions of March 9, 2001" from the department, stated that in looking in the history, "the practice was discontinued to avoid serious sanctions against our program." He pointed out that this was almost 30 years ago; was it voluntary by the state, he asked, or was it an actual mandate from Congress? Number 0543 MS. GAMEZ replied that she couldn't speak to whether it was a congressional Act; however, there is now an interstate compact that all states and jurisdictions participating in the UI system are signatory to. Every state, Puerto Rico, Guam, and the District of Colombia are part of the compact that makes the interstate system run smoothly. There are some advantages to being a part of that, she said; for instance, when Alaskans move out of state, they can go elsewhere and receive [UI] funds while training in another state. Oftentimes, there are combined wage claims, so a person isn't just claiming against Alaska; if wages were earned in Ohio, for example, it takes those wages out of both the Alaska and Ohio trust funds to pay the claimant. MS. GAMEZ explained that tracking the success of [the DLWD's] training programs, employment, and placement will be possible soon; right now, [the DLWD] has no capability to do that on an interstate basis. She said soon, if a person leaves the state, [the DLWD] will be able to know if those federal training dollars are still working for [the department]. The tracking system will be called the Wage Record Interchange System and is modeled after the benefit system. MS. GAMEZ stated that it is a "bitter pill to swallow" when thinking about all of the dollars going out of the state in wages and UI benefits, although she believes a benefit comes back to the state and is reciprocal. Number 0640 REPRESENTATIVE HALCRO said the concern is that every employer and employee pays into this fund, but there are some industries that have a higher impact on the UI fund; for instance, referring to chart 1, entitled "Alaska's Interstate UI claimants claimants in the manufacturing category are in seafood processing. That industry obviously has more of a draw on the UI fund; meanwhile, other industries and employers might have a negligible effect. There has to be some kind of way to equal this out so other employers aren't bearing the burden for this one industry. MS. GAMEZ responded that the UI program has a system called the experience-rating system that does just that. The more seasonal an industry - the more turnover - the higher the rate is proportionately. Number 0754 CHAIR MURKOWSKI, referring to the statistics for interstate claims from the handout, said essentially 2,600 unemployed workers living in Alaska filed claims against other states as compared with over 10,000 claims filed against Alaska by those living outside [Alaska]. She asked whether Ms. Gamez attributes the bulk of that to those in the seafood processing industry. MS. GAMEZ remarked that [Alaska] has the highest proportional rate of interstate claims. Last year, in-state [Alaskan claims] totaled $107 million; the number of those living outside the state claiming against [Alaska] was the lowest that it had been in a long time, at about 18 percent or roughly $19 million. She commented that the gap has been narrowed a bit. Number 0861 MS. GAMEZ stated that [the DLWD] has focused on the seafood and processing industries. There are a lot of people coming up to work in both the seafood and tourism industries, she said, and these are the [employment sectors] for which [the DLWD] is trying to attract Alaskans; it is a challenge because some people don't want to do these jobs or they are not trained adequately to go to work at one of the higher-paying jobs. [The Department of Labor and Workforce Development] tries to focus the job training and employment service programs to train Alaskans for jobs that go to [nonresidents]. MS. GAMEZ pointed out that during the last hearing on this bill, the report of nonresidents working in Alaska was discussed. [The Department of Labor and Workforce Development] uses that report to target specific industries for training, and uses the state and federal dollars to target occupations in the hopes of making the connection for Alaskans. When she started with the department six years ago, she said, between 23 and 25 percent were interstate claimants, and now is down to 18 percent. She said she would like to think that [the DLWD] is partially to credit for making the training opportunities available for those industries that tend to have a higher nonresident population; there is a direct correlation between the job training and UI data that [the department] gets. It is a goal of the department to get that number down, she said, and [the DLWD] wants Alaskans to get those high-paying jobs. CHAIR MURKOWSKI asked if there is any way to keep Alaskans for these jobs that are here, rather than having this constant out- migration. Number 1008 MS. GAMEZ remarked that the UI program enables many Alaskans to stay here. Many people in the trades will go outside [Alaska], and when workers are needed, [Alaska] can't get them, and they end up being imported; oftentimes UI compensation is the thing that allows Alaska to keep the expertise in-state, as opposed to depending on bringing people in - that coupled with the nonresident hire report and the targets that are set in the job training sector which are all interrelated. It is a huge policy issue, she emphasized, and is something that [the DLWD] continues to tackle because of the permanent fund and the cross- match that can be done on wages. [The Department of Labor and Workforce Development] is in a unique position to know what those industries are and how to go about targeting them, which is being done, she said. MS. GAMEZ offered to meet with committee members to talk about the job training sector within the Division of Employment Security to further explain the linkages. Number 1153 RON HULL, Acting Director, Division of Employment Security, Department of Labor and Workforce Development (DLWD), added that seafood processing is an industry that the division works specifically with, and that the division has opened an office in Naknek to try to get Alaskans into those jobs. "We" have made some inroads in this area, he remarked. REPRESENTATIVE HALCRO asked: For how many claimants is going through job training and actively looking for work in the state a priority? And how many return to the Lower 48 after the season ends? MS. GAMEZ replied that [the DLWD] targets training on Alaskans. Training is going on during the off-season, so [the department] is focusing it on the people who stay in-state. It is a federal program, and there are limitations; however, [the DLWD] can't [deny] people who choose to live here. She said training is oftentimes counter-cyclical to working. REPRESENTATIVE HALCRO expressed the desire to make sure that the UI benefit is a livable one between jobs; however, someone who is just here seasonally with no desire to stay in the state beyond the season is a concern - the person who goes home to the [Lower 48] and collects UI for as long as it allows, waiting for the season to start again. Number 1204 MS. GAMEZ confirmed that Representative Halcro had a valid point. She said the longest duration of benefits that a person could get is 26 weeks, with the average duration for all claims against [Alaska] at 14.9 weeks. She said the conclusion that she draws is that people are looking for work or staying in- state and are unable to work because of the weather. There are few claimants that exhaust benefits, whether living in or out of the state. In addition, she said, [Alaska] has the lowest maximum weekly benefit amount in the Western region; a person would do better filing against another state rather than filing against [Alaska]. She said there is nothing that [the DLWD] can do to discriminate against the people who file against the state and then leave. REPRESENTATIVE HALCRO referred to pages 4 and 5 of the handout entitled "Answers to House Labor and Commerce Committee Questions of March 9, 2001." He pointed out that it says that workers with claims against other states are not asked to participate in profiling services but are registered with the employment service office nearest to the resident. He asked Ms. Gamez to further explain this information. Number 1279 MS. GAMEZ explained that the worker profiling and reemployment services started as a pilot program funded through the United States Department of Labor (USDOL). There is a statistical model that [the division] matches against the claimant population to identify people who are likely to exhaust UI benefits; however, there are exemptions to that, such as for a person who has a labor attachment to a certain field through a union hall. Most people are pretty happy about it, she remarked; it's kind of a "job-club" atmosphere in come together to learn about interviewing skills, job leads, how to dress for an interview, and how to give a good interview. MS. GAMEZ said the reason interstate claimants aren't profiled is because the funding isn't available to do it; however, she added, it is being looked at. She said she feels very strongly that if Alaskans have to leave for whatever reason and go elsewhere, she would hope that they would get those intensive employment services. The reciprocity issue is very important to [the department], and [these services] will be added in the future. She said there is a finite amount of dollars, and [the DLWD] tends not to include them in the statistical sample at this point. Number 1376 REPRESENTATIVE CRAWFORD emphasized that [Alaska] pays the lowest UI weekly benefit amount in the Western region. Number 1455 PAM LaBOLLE, President, Alaska State Chamber of Commerce, stated that [business community members] have been slow to really understand this. She said Ed Flanagan, Commissioner, Department of Labor and Workforce Development, came to speak to the chamber's board of directors about six weeks ago, and the understanding amongst the [business membership], she said, was that the maximum weekly benefit amount was going to be raised from $248 to $284, and that was the "sum" of it. Earlier this week she had decided to read the bill and found it difficult [to understand], so the department gave her a study guide and now there is some concern. MS. LaBOLLE stated that one of the things that makes it difficult is that 42 states [or jurisdictions], including Puerto Rico and the District of Colombia, are using a different formula, the high-quarter formula; only six are on the formula that Alaska is on, the annual-wage formula; and four are on the average-weekly-wage formula. Alaska is one of nine states that give a supplemental benefit for dependent children, so the maximum weekly benefit amount ranges - depending on the number of dependent children that might be involved - from $248 to $320. According to some information from the [DLWD], on average an unemployed Alaskan's [UI] check replaces less than 30 percent of the average weekly wage. She also understood that with the two steps involved in this legislation, it would increase it to seems like a "hefty" step. And then it is tied to a formula, rather than having it reviewed by the legislature, which looks at the current circumstances to determine what the economic climate is. Number 1622 MS. LaBOLLE stated that as employers, [chamber members] have always felt that it is important to have real people looking at the increases that are going to happen in taxes rather than having an automatic formula. The other thing that happens, she said, is that when there is a downturn in the economy, the [high rate] is still being paid and it's harder to be reacted to quickly. All in all, she commented, there is enough concern at this point that she would hope that the committee would give [the chamber] a little more time to get some employer feedback for the committee on this issue. Number 1712 REPRESENTATIVE CRAWFORD said by tying [the indicator] to the average weekly wage when the [downturn] happens, [benefits] will actually go down; [Alaska] won't be left at the high wage [rate] like the way the [system] is set up presently, which is one of the reasons he thinks this is a far better solution because it can fluctuate with the economy much better than if it were tied to the consumer price index (CPI) or some indicator that really doesn't go down. The average weekly wage does fluctuate over the years. MS. LaBOLLE responded that since the legislature meets essentially every six months, there is an opportunity to react quickly to an economic trend, rather than doing away with the formula. REPRESENTATIVE CRAWFORD asked if [the legislature] had lowered it before. MS. LaBOLLE said she didn't know the history of UI in Alaska. Number 1774 REPRESENTATIVE CRAWFORD stated that in the last 25 years it hasn't happened, and he feels that it would be politically unfeasible for [the legislature] to go in and lower the unemployment benefits, especially when heading into an [economic] downturn. MS. LaBOLLE suggested perhaps not lowering it but keeping it from increasing at the very time when employers are hurting the most with the "downed" economy. REPRESENTATIVE CRAWFORD stated that he thought it lowered as the economy went down. Number 1880 MS. LaBOLLE said it has been viewed too simply by a lot of people, and that is why there hasn't been a great deal of concern. There is probably a good case for increasing the benefit amount; however, she didn't know to what extent. In level. She reiterated that there is concern about tying it to a formula. She pointed out that the increase is approximately $10 million in taxes over two years, which sounds excessive. MS. LaBOLLE said the employer's amount would be a .2 percent increase in the tax rate, and the employee's amount would be a .0003 percent increase in the tax rate, so the employers are going to get the biggest "jolt." REPRESENTATIVE MEYER asked Ms. LaBOLLE which of the employers she represents would be most impacted by this. MS. LaBOLLE replied that it would be [employers] in construction, hotels, and restaurants where there is a greater turnover because it is experienced-rated. So the more it is used, the higher the tax rate is going to be and the more that will be paid. REPRESENTATIVE MEYER stated that during the minimum wage legislation, the committee heard from a lot of employers, but with this topic there has been [no testimony from employers]. MS. LaBOLLE commented that [employers] haven't understood that it involves two steps, and would increase to 50 percent from the current 30 percent of the average weekly wage and would stay there. Number 2052 REPRESENTATIVE ROKEBERG explained that there is a significant "disconnect" between the activities that go on [at the legislature] and in the business community of this state. He asked Ms. LaBOLLE if she would agree that it is in large part a fault of the press - that they report the end of activities, when bills are passed, with the exception of the budget or a few of the "sexier" media issues that get ongoing press. MS. LaBOLLE stated that people could turn on the television and watch what is going on if they really care. Also, she said, it behooves anyone, while the legislature is in session, to watch what is going on or at least have some basic connection to the process. She doesn't absolve her members, business, or any citizen of Alaska if something happens to them because of an action of the legislature that they weren't aware of, she added. Number 2149 REPRESENTATIVE ROKEBERG stated that the Gavel-to-Gavel Alaska coverage of this committee numbers half a dozen times or less, although that is more than in prior years. REPRESENTATIVE HALCRO, returning attention to HB ADJOURNMENT There being no further business before the committee, the House Labor and Commerce Standing Committee meeting was adjourned at 4:50 p.m.

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