HOUSE BILL NO. 87                                                                                                               
                                                                                                                                
"An Act relating to money credited to the account of                                                                            
the state in the unemployment trust fund by the                                                                                 
Secretary of the Treasury of the United States; and                                                                             
providing for an effective date."                                                                                               
                                                                                                                                
REBECCA GAMEZ, DIRECTOR, EMPLOYMENT SECURITY DIVISION,                                                                          
DEPARTMENT OF LABOR testified in support of HB 87. She                                                                          
observed that HB 87 provides statutory language to allow a                                                                      
federal Reed Act distribution. She explained that the                                                                           
current statute AS 23.20.145(f) allows Reed Act funds to be                                                                     
used for the payment of unemployment benefits and the                                                                           
administration of both the Employment Services program and                                                                      
the Unemployment Insurance program. Under the Balance Budget                                                                    
Act of 1997, Congress specified that the distribution of                                                                        
these funds could only apply to the administration of                                                                           
unemployment insurance. The Balance Budget Act also required                                                                    
states to pass enabling legislation. The Reed Act                                                                               
distribution is a transfer of excess funds that are                                                                             
collected through the federal Unemployment Tax Act. When                                                                        
these funds have met a proscribed federal ceiling they give                                                                     
the excess back to the state. The last Reed Act distribution                                                                    
was in 1958. The legislation would allow the state to                                                                           
receive the funds.                                                                                                              
                                                                                                                                
In response to a question by Co-Chair Therriault, Ms. Gamez                                                                     
explained that the administrative funds would be used for                                                                       
equipment purchases. They anticipate a distribution of $600                                                                     
- $700 thousand dollars. She observed that $500 - $600                                                                          
thousand dollars were shifted from an unemployment tax                                                                          
redesign capital improvement project to meet their Y2K                                                                          
needs. The Reed Act distribution would be used to replace                                                                       
the capital project funds. There are no general funds in                                                                        
this component. The department has two years to obligate the                                                                    
funds.                                                                                                                          
                                                                                                                                
Representative Kohring asked how much of the money was paid                                                                     
into the system by Alaskan business. Ms. Gamez stated that                                                                      
the Alaska base is divided by the federal base. Alaskan                                                                         
employers do not pay in as much as other states. The state                                                                      
receives more back then it pays in. Representative Kohring                                                                      
asked if Alaskan businesses could receive a rebate. Ms.                                                                         
Gamez stated that they have not considered a rebate. She                                                                        
noted that Alaska receives 320 percent back for                                                                                 
administrative funding. The next highest state receives 120                                                                     
percent. She did not think that a rebate would substantially                                                                    
lower employer taxes.                                                                                                           
                                                                                                                                
Co-Chair Mulder asked if the funds were limited to                                                                              
administration of unemployment compensation. Ms. Gamez                                                                          
stated that they were limited to administration of                                                                              
unemployment compensation.                                                                                                      
                                                                                                                                
Co-Chair Therriault asked if a square footage fee charged to                                                                    
the program for their space in a state building would be                                                                        
covered under administrative costs. Ms. Gamez thought that                                                                      
the rental fee would be covered under administration as long                                                                    
as it was square footage for offices that administered the                                                                      
unemployment insurance program or tax sections. She noted                                                                       
that there are offices in Juneau, Anchorage and other parts                                                                     
of the state.                                                                                                                   
                                                                                                                                
In response to a question by Co-Chair Therriault, Ms. Gamez                                                                     
clarified that the department expects three distributions                                                                       
beginning in 1999.                                                                                                              
                                                                                                                                
Co-Chair Mulder observed that the funds would have to be                                                                        
appropriated by the legislature. He summarized that a                                                                           
portion could be appropriated to an Alaska Public Building                                                                      
Fund. Ms. Gamez explained that the funds would be                                                                               
appropriated from the rent collections to the Unemployment                                                                      
Security Division. The money could then be applied to the                                                                       
square footage of maintenance in state buildings.                                                                               
                                                                                                                                
Co-Chair Therriault clarified that it is not an                                                                                 
appropriation bill.                                                                                                             
                                                                                                                                
DAN KANOUSE, BUDGET ANALYST, EMPLOYMENT SECURITY DIVISION,                                                                      
DEPARTMENT OF LABOR explained that the Department of Labor                                                                      
would receive the funds on October 1, 1999 for use in FY00.                                                                     
                                                                                                                                
Representative J. Davies MOVED to report HB 87 out of                                                                           
Committee with the accompanying fiscal note. There being NO                                                                     
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
HB 87 was REPORTED out of Committee with a "do pass"                                                                            
recommendation and with a fiscal impact note by the                                                                             
Department of Labor, dated 3/5/99.