SB 306-UNEMPLOYMENT INSURANCE FUND & TAXES    SENATOR CON BUNDE announced SB 306 to be up for consideration. 2:32:24 PM PAULA SCAVERA, Special Assistant to the Commissioner, Department of Labor and Workforce Development (DOLWD), explained that this is a very simple bill and brings the state into conformity with federal law, which was passed in 2004 and deals with people who manipulate the system to pay UI taxes at an artificially low rate. CHAIR BUNDE asked for an explanation of what past abuse has been like. TOM NELSON, Director, Division of Employment Security, Department of Labor and Workforce Development (DOLWD), replied that currently the division can identify State Unemployment Tax Act (SUTA) dumping, which is a scheme that is more prevalent in the Lower 48 where employers move groups of employees to another business entity for the sole purpose of deriving a lower UI tax rate - defrauding the system. The state lacks conformity in establishing criminal and civil penalties associated with that type of crime. Alaska has had little activity like that. One was identified, but the department had no authority to take action. CHAIR BUNDE asked if there would be substantial cost to the employers if the state chooses not to comply. MR. NELSON replied that the state faces decertification to operate unemployment insurance and collect any benefit from the FUTA tax system. That includes the entire Unemployment Insurance system as well as the Wagoner Peyser Act funded job center services. The losses would amount to $103.9 million for one fiscal year. 2:36:19 PM PAT SHIER, Acting Deputy Director, Division of Employment Security, said he would be happy to answer questions. MS. SCAVERA elaborated that Alaska employers would pay $103.9 million in additional taxes. The department would lose another $30.8 million in operational funds for its Unemployment Insurance programs and employment programs. SENATOR BUNDE commented that while this is an option, it really isn't. MS. SCAVERA agreed. 2:37:13 PM SENATOR BEN STEVENS said an existing entity can't be audited and asked if this only happens when a trade occurs. MR. SHIER replied that was correct. No new powers were granted to the department other than the criminal penalty that could be imposed. The federal guidelines require the department to show intent. Currently the department has the authority to audit periodically to make sure employers are complying with the entire Chapter 23.20. SENATOR BUNDE closed public testimony. SENATOR BEN STEVENS moved to report SB 306 and attached fiscal notes from committee with individual recommendations. There being no objection, it was so ordered.