Legislature(2013 - 2014)BARNES 124
03/13/2013 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB76 | |
| HB74 | |
| HB112 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 76 | TELECONFERENCED | |
| += | HB 74 | TELECONFERENCED | |
| *+ | HB 112 | TELECONFERENCED | |
HB 76-UNEMPLOYMENT; ELEC. FILING OF LABOR INFO
3:27:15 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 76, "An Act relating to electronic filing of
certain information with the Department of Labor and Workforce
Development; relating to surcharges, rate increase reduction,
prohibition on the relief of certain charges, the unemployment
trust fund account, and the offset of certain unemployment
compensation debt under the Alaska Employment Security Act;
relating to the definition of 'covered unemployment compensation
debt' in the Alaska Employment Security Act; and providing for
an effective date."
3:28:27 PM
PAUL DICK, Director, Central Office, Division of Employment
Security (DES), Department of Labor & Workforce Development
(DLWD), offered a brief recap of HB 76. He stated that Section
1 allows the commissioner to allow electronic filing of
documents in place of paper filing. Section 2 would allow for
an appropriation into the unemployment (UI) trust fund and
Section 3 is a conforming section for federal provisions for
relief of charges for UI. Section 4 would repeal and reenact a
table to address the trust fund solvency and also would allow
for the UI trust fund solvency to be calculated at a more
precise percentage, to the hundredths of a percent instead of to
tenths of a percent. He related that Section 5 would allow the
commissioner of DLWD to suspend all or part of the increases of
the UI tax rates conditioned on an average high cost multiple of
.8 or greater. He stated that Section 6 would bring the state
into conformity with federal law by removing the department's
authority to waive collection of a penalty established due to a
misrepresentation. Additionally, this section would authorize
the department to deposit 30 percent of penalty collections into
the UI trust fund. Section 7 would authorize the department to
offset UI compensation debts through the federal treasury offset
program - which addresses individual income tax refunds - and
place them into the UI trust fund. Section 8 defines covered
employment compensation. He concluded his summary by stating
that Sections 9-11 relate to the effective date.
3:30:39 PM
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative
Affairs, Teamsters Local 959, offered to touch on the important
points. She commended the department for requesting the bill
and offered support for the bill except for Section 5. She said
that the unemployment insurance tax formula has been in place
for 20-plus years and is a sound formula. She related that the
Teamsters Local 959 (Teamsters) represents about 7,000 working
teamsters around the state in almost every industry, except for
the tourism and fishing industries. She informed the committee
that the Teamsters Local 959 is also incorporated as an employer
so the Teamsters would be affected by the employer tax rates
under the bill. In 2012, as an employer, the Teamsters paid
$37,000 in UI taxes. Additionally, the Teamster's employees,
about 35 employees, paid approximately $8,300 in UI taxes. She
reported that Alaska is one of three states in the country with
employer and employee contributions going into the unemployment
insurance (UI) trust fund. The UI trust fund has been sound,
even during the recent U.S. recession, in which 33 states became
insolvent. In fact, the state has had a sound plan and has been
able to make contributions to employees who find themselves
unemployed.
3:34:00 PM
MS. HUFF TUCKNESS referred to questions the Teamsters asked the
department and said while the DLWD's answers don't clearly prove
the Teamsters point, they do raise some questions about Section
5 for the committee to consider as it deliberates HB 76. She
read the first question the Teamsters posed, which asked whether
employers and employees will be required to pay more than under
the earlier [UI tax] rate if it had not been suspended in a
situation in which the UI tax rate increases are suspended as
referenced in Section 5 of the bill and the average high-cost
multiple falls below the trigger. She related the department's
response that if rate increases are suspended, employers and
employees would be required to pay slightly more in UI taxes in
subsequent years than they would have if increases had not been
suspended in earlier years. However, over the long term, the
amount paid by employers and employees would be about the same
or slightly less than if increases were never suspended. Thus,
the department's view is the suspension would have the effect of
deferring suspended taxes that would be absorbed over multiple
years after the suspensions.
MS. HUFF TUCKNESS explained that the department's response
raises the question regarding whether the impact on employers
and employees will be significant enough to catch up over time,
assuming the department's information is from an actuary.
Granted, it's not a black and white issue as the UI tax rate is
a complicated one with a formula. After all, the current system
has worked. The department, she related, went on to respond
that the intent of the aforementioned provision is to provide
some flexibility so as not to overtax employers and employees in
a year in which it is not necessary to do so. She questioned
the definition of overtaxing and reminded members that the UI
trust fund's purpose is to pay compensation for employees who
are laid off from their jobs. In the event a substantial
recession occurs and the UI rate increase has been suspended,
she was unsure whether adequate funds will exist to cover UI.
Further, she questioned whether reducing UI taxes on employers
and employees might put the state into insolvency and
necessitate borrowing from the federal government to ensure the
UI trust fund has a sufficient balance. Additionally, if it
became necessary to borrow from the federal government, the
state would repay the loan with interest.
3:37:51 PM
MS. HUFF TUCKNESS related that in response to the Teamsters'
question inquiring as to the meaning of the average high-cost
multiple, the DLWD explained that the average high-cost multiple
is a measure of the UI Trust fund's solvency used primarily by
the federal government to compare state systems and to encourage
states to keep a healthy amount in reserve. This measure looks
at the state's recent history, the previous three national
recessions or 20 years, whichever is longer, to determine which
percentage of the employers' wages was paid out in unemployment
insurance claims. The three highest cost years, in terms of
percentages, are then averaged and compared to the current trust
fund balance. An average high-cost multiple of 1.0 means the
state has as much money in its trust fund as a percentage of the
total wages of employers covered by the state unemployment
insurance system as the average percentage was paid out during
those three higher cost years. Ms. Huff Tuckness related that
percentages are used rather than the actual amounts since a
larger economy would mean that more employees could potentially
file for unemployment benefits. She explained that this would
require a larger amount be paid out or required to be held in
the reserve and assumes a potential run on the UI trust fund
could occur in the event a large number of employees were
subsequently laid off.
3:39:37 PM
MS. HUFF TUCKNESS expressed another concern regarding whether
sufficient reserves could be built up if the UI tax rate is
reduced if Section 5 was adopted. For example, the multiple has
been nine-tenths of a percent for ten years and assuming the
economy changes and the rates can no longer be suspended, using
the contribution rate in 2011-12 - which increased by one-half
of one percent - it appears as though the department could only
collect three-tenths of one percent, which would be insufficient
to build up the reserves in the UI trust fund. In fact, if the
UI tax rates are suspended, she predicted the employer and
employee would ultimately pay more in order to replenish the UI
trust fund. The department responded that the suspension of a
tax increase would likely result in a slightly higher tax rate
in the next year or two since the current calculations in
statutes and unchanged by HB 76 would move the UI trust fund
balance back toward its desired rate between the 3.0-3.3 percent
of total wages paid by employers covered by the system. She
said the DLWD further predicted it is very unlikely that the UI
tax rates would rise dramatically from one year to the next.
However, this bill would delay the amount of time it would have
to build up the reserves in the UI trust fund. She was unsure
whether this proved the Teamster's point, but it highlights the
issue.
MS. HUFF TUCKNESS reminded members that the Teamsters would be
affected by the bill as both an employer and by its employees
[each of which make contributions]. She highlighted that this
raises the question on the proposed department flexibility on
the UI rates and whether the department would need to
subsequently catch up if it reduced rates [and an adverse
economy reduced the UI trust fund balance.] She questioned
changing the formula for a plan that has been working well for
years. Further, Alaska's UI trust fund has not become insolvent
as many states experienced when many employees in the Lower 48
became laid off and the states experienced a run on their funds.
Actually, these Lower 48 states had a lack of contributions from
employers and employees going into the funds to ensure when a
recession happens that the UI trust fund is adequately funded.
She asked the committee to consider Section 5, and to please
reconsider the impact of this section on employers and employees
over the long term.
3:43:20 PM
REPRESENTATIVE JOSEPHSON asked whether the letter she referenced
was from Mr. Rick Boyles [dated March 1, 2013.]
MS. HUFF TUCKNESS answered yes.
3:43:48 PM
REPRESENTATIVE JOSEPHSON asked whether the second document had
been distributed to the committee.
MS. HUFF TUCKNESS answered no. In further response, Ms. Huff
Tuckness repeated the definition of average high-cost multiple,
as follows:
The average high-cost multiple is a measure of the
trust fund's solvency used primarily by the federal
government to compare state systems and to encourage
states to keep a healthy amount in reserve. The
measure looks at the state's recent history, the
previous three national recessions or 20 years,
whichever is longer, to determine which percentage of
the employers' wages was paid out in unemployment
insurance claims. The three highest cost years, in
terms of percentages, are then averaged and compared
to the current trust fund balance. An average high-
cost multiple of 1.0 means the state has as much money
in its trust fund as a percentage of the total wages
of employers covered by the state unemployment
insurance system as the average percentage was paid
out during those three higher cost years.
3:45:15 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 76.
[HB 76 was held over.]
The committee took an at-ease from 3:45 p.m. to 3:46 p.m.