Legislature(2017 - 2018)HOUSE FINANCE 519
02/02/2018 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB215 | |
| HB142 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 142 | TELECONFERENCED | |
| + | HB 215 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 142
"An Act relating to unemployment insurance benefits;
increasing the maximum weekly unemployment insurance
benefit rate; and providing for an effective date."
Representative Guttenberg reported that he had asked a
young woman in the back of the room why she was supportive
of the bill. She had replied that it would help her pay her
mortgage. He was supportive of the legislation.
2:20:36 PM
REPRESENTATIVE CHRIS TUCK, SPONSOR, provided a summary of
the bill:
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.
2:25:49 PM
Representative Tuck reviewed the sectional analysis (copy
on file):
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, 2019, 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, 2018.
2:28:13 PM
Representative Tuck noted that the bill was not changing
the dependent factor.
Vice-Chair Gara referenced opposition from the NFIB. He
understood that calculation of employer contributions was
written in another area of statute.
Representative Tuck deferred to the department.
LENNON WELLER, ECONOMIST, DEPARTMENT OF LABOR AND WORKFORCE
DEVELOPMENT, replied that a separate statute AS 23.22.290
outlined how tax rates were calculated.
Vice-Chair Gara asked whether the bill would increase the
employee contribution.
Ms. Weller answered that any time the cost of a program was
increased there was a corresponding increase in tax rates
going forward. There was a forecast to FY24 showing the
difference employers and employees would pay if the bill
passed. There was a 73/27 percent split (employer and
employee respectively).
2:31:10 PM
Vice-Chair Gara asked for verification that in all states
but two the employer covered the costs.
Representative replied in the affirmative - Pennsylvania
and New Jersey were the two other states that did not cover
the costs.
Representative Neuman asked how the bill would impact self-
employed people.
Representative Tuck deferred to the department.
PATSY WESTCOTT, CHIEF OF UNEMPLOYMENT INSURANCE, DIVISION
OF EMPLOYMENT AND TRAINING SERVICES, DEPARTMENT OF LABOR
AND WORKFORCE DEVELOPMENT, answered that self-employed
individuals did not pay into the program and would not be
impacted.
Representative Neuman recalled a similar bill on the
subject from the past. He spoke of construction companies
and the complications surrounding independent contractors
on job sites. He wondered whether the bills were related.
2:33:16 PM
Representative Tuck answered that the independent
contractor legislation had more to do with cheating Davis
Bacon requirements. He explained that a self-employed
contractor working on a Davis Bacon job was not required to
pay themselves the same benefits and wages laid out in
Title 36. He said that the bill did not speak to the issue.
He added that with private contractors the employer could
avoid paying the benefits due to hourly employees.
Representative Neuman stated that self-employed individuals
also had to pay self-employment taxes. He was unsure
whether the unemployment compensation act was part of self-
employment taxes.
Ms. Westcott asked Representative Neuman to restate the
question.
Representative Neuman complied.
Ms. Westcott answered that contributions to the
Unemployment Insurance Trust Fund were not taken from self-
employed individuals. The division investigated workers
that were misclassified and reported incorrectly as
independent contractors, those issues were addressed so
that the employer could correctly report the employees and
pay security tax contributions on their behalf.
2:35:36 PM
Representative Pruitt asked when the employer paid the
money, withheld from an employee's check for unemployment
benefits, to the department.
Ms. Westcott replied that the funds were deducted from the
employees check each pay period and then held in trust by
the employer on behalf of the employee. The funds were
submitted to the department on a quarterly basis.
Representative Pruitt referenced the effective date of
January 1, 2018. He understood that this could affect the
payments after March 31, 2018.
Mr. Weller answered that tax rates were calculated once per
year by the department and were effective for the following
calendar year. He said that he could not speak to the
retroactive nature of the bill but that the three most
recent state fiscal years of costs and the trust fund
balance at the end of September were used to calculate
rates for the following January. He did not believe that
rates would be recalculated if the bill went into effect
partway through a calendar year.
Co-Chair Seaton noted that the bill had been introduced the
previous session and wondered whether the effective date
should be updated.
2:38:04 PM
Representative Tuck answered that the effective date should
be amended.
Representative Pruitt referenced Section 2 of the bill. He
expressed concern for the elimination of legislative
control in issues related to the bill.
Representative Tuck responded that the bill would bring us
up to date with other states by bringing the wage
percentage factor up to 50 percent. He said that there was
a chart in the packet that showed actual wage base
predictions through 2024.
Representative Pruitt struggled to understand the numbers.
He hoped that the department could address his concerns.
2:40:57 PM
Representative Neuman referenced Line 14, page 9 of the
bill, which discussed the increase of weekly benefits. He
wondered whether the increase mentioned would be increased
to remain at the 50 percent of weekly average determination
or would it fluctuate.
Representative Tuck responded that it would be changed
annually and would be locked in for a year. The wages would
be determined before November 1, and the calculation would
be used to determine the benefits after January 1.
Representative Neuman clarified that the increase or
decrease would depend on the average wages of Alaskans at
50 percent of the average weekly determined rate.
Representative Tuck answered in the affirmative.
Representative Tilton asked whether the bill would impact
the Technical Vocational Education Program (TVEP) funds.
Representative Tuck replied that the legislation would not
impact TVEP or STEP [State Training and Education Program]
grants.
Ms. Westcott explained that those programs were funded
through a portion of a tax collected from employees and was
dedicated to the TVEP and STEP programs prior to the rest
of the tax being deposited into the trust fund. The funds
from the trust could only be used to pay benefits, training
programs were funded through different federal grants
received by the department.
2:44:39 PM
Representative Guttenberg queried the logistics of the $250
increments to reach the new maximum qualifying amount and
the $2 increments for each additional $250 for qualifying
wages.
Representative Tuck referenced a handout from the
Department of Labor and Workforce Development (copy on
file):
• For every additional $250 in base year wages, $2 is
added to the weekly benefit, with the schedule
maxing out at a base year wage of $42,000 and $370
weekly benefit (excluding dependent child
allowances, if applicable).
Representative Guttenberg understood that the rate would go
up automatically as pay wages increased to $250.
Representative Tuck replied that the number would be locked
in annually.
Representative Pruitt asked whether someone could speak
about the fiscal note.
Ms. Westcott deferred to the Office of Management and
Budget.
Representative Pruitt asked about the mechanism that made
the employee percentage of contribution at average rate
class go down over the next 5 years under the legislation.
Mr. Weller answered that the decrease was due to the change
in the minimum tax rates.
2:48:56 PM
Representative Gara referenced Page 7 of the legislation
and stated that the benefit rate had not increased.
Representative Tuck replied in the affirmative.
Vice-Chair Gara understood that the bill assumed that as
wages went up with inflation the benefit also increased.
Representative Tuck answered in the affirmative. Whether a
person was making $42,000 or $84,000 per year, they were
locked in at the #370 per month. He speculated that a
person making $84,000 per year probably had higher
expenses.
Representative Neuman asked about people filing for
disability insurance. He asked whether the bill would
increase disability payments.
2:51:07 PM
Representative Tuck answered that the bill only dealt with
unemployment insurance.
Representative Neuman remarked that he had not known
whether disability insurance fell under //
Representative Pruitt referred to the indeterminate fiscal
note. He hoped that an estimate of cost to the state could
be determined.
CAROLINE SCHULTZ, POLICY ANALYST, OFFICE OF MANAGEMENT AND
BUDGET, responded that OMB had used actual state costs and
liabilities from 2017 to model as if the legislation had
been in effect in 2017. There had been about 1,500 state
employees that qualified for the benefits under
unemployment insurance. She reminded the committee that
state employees and the state as an employer did not pay
into the unemployment fund through the traditional tax that
most employers did, rather the state reimbursed the fund as
the state. If a state employee made a claim, the state
reimbursed the fund, which came out of the working reserve
fund. She said that the cost difference to the state would
have been $456.6 thousand more dollars out of the working
reserve fund in the 2017 calendar year; the state paid $4.4
million in calendar year 2017 and had the 487 claimants
qualified for the higher rate greater that $370, the total
cost to the state would have been $4.9 million.
Representative Pruitt stated that the explanation was
helpful.
2:54:46 PM
Co-Chair Seaton asked whether the department could craft a
new fiscal note that reflected the fiscal impact due to
inflation adjustment.
Ms. Schultz said that because the amounts of employees that
would be claiming against the fund, and what their base
wages would be, the fiscal impact would remain
indeterminate.
Co-Chair Seaton relayed that the bill would be heard on
February 7, 2018. He asked amendments to be in Co-Chair
Foster's office by 5:00 pm on February 6.
2:56:34 PM
AT EASE
2:56:52 PM
RECONVENED
Co-Chair Seaton OPENED public testimony.
TRENTON ENGLISH, SOUTHEAST REPRESENTATIVE, ALASKA LABORERS,
JUNEAU, testified in favor of the bill. He felt that the
rising cost of living should be considered and that
unemployment benefits should be increased to help working
Alaskans.
2:58:27 PM
JOSHUA GARDNER, LABORERS 942, JUNEAU, spoke in support of
the bill. He shared that it had been a slow year for
construction workers and if he was lucky he worked 7 to 8
months of the year, making $800 to $1,000 per week. He said
that when he was on unemployment he made $370 per week,
which made it difficult to support his family and prepare
for emergency expenses.
2:59:16 PM
SYDNE WILLIAMSON, CARPENTERS 1281, JUNEAU, testified in
support of the legislation. She shared her personal story.
She relayed that she had worked jobs she did not enjoy and
had lived in the women's shelter. She had gone back to
school and she was now a carpenter. She loved her job and
worked hard to support herself and her daughter. She
relayed that she had to have a roommate to afford living in
Juneau. She had been part of the crew that built the
building at the airport. She was now out of work as the
nature of carpentry work was job by job. She felt that she
should not have to deplete her savings while in between
jobs. She asked the committee to consider raising the
weekly unemployment insurance benefit rate.
3:02:27 PM
KYLEE LARSEN, LOCAL 1281, JUNEAU, spoke in support of the
bill. She stated that the economy in Alaska thrived in the
summer months. She spoke to struggling to find work and pay
bills. She was a first-year apprentice in the local
carpenters' union. She had broken her hand earlier in the
year and had healed, but the work was now scarce. She
stated that the average daycare charged $900, per month,
per child, which was a major stressor on top of food, gas,
and rent. She lamented that these factors left hardworking
individuals to contemplate moving to another state.
3:04:50 PM
LANCE NELSON, IRONWORKERS 751, FAIRBANKS (via
teleconference), spoke in favor of the bill. He felt that
when work slowed, and lay-offs occurred, the low
unemployment benefits forced people to move out-of-state to
find work and benefit from better unemployment benefits. He
stressed that $370 per week was not a livable wage for
Alaska families. He argued that the funds were not
considered a luxury by needy working families but went
right back into the economy being spent on home heat, food,
and rent.
3:06:52 PM
JD WILKERSON, LOCAL 751, FAIRBANKS (via teleconference),
spoke in favor of the legislation. He indicated he had seen
his volume of work drop about 50 percent over the past 2
years. He reported that over the last couple of years he'd
seen young workers forced to leave Alaska. He hoped that
the states economy could provide the means for families to
remain in the state.
Co-Chair Seaton indicated the legislative information
office was having technical difficulties.
3:10:22 PM
AT EASE
3:11:55 PM
RECONVENED
Co-Chair Seaton reported that there were 4 additional
testifiers in Anchorage.
3:13:14 PM
At EASE
3:14:12 PM
RECOVENED
DUSTIN SWATEK, PNWRCC, ANCHORAGE (via teleconference),
spoke in favor of HB 142. He said that much of the trade
work in the state was seasonal. He lamented that these
workers often lived paycheck to paycheck. He believed that
a raise in the unemployment benefits would help workers
meet their financial needs until they could procure work.
3:15:27 PM
RYAN ANDREW, IBEW LOCAL 1547, ANCHORAGE (via
teleconference), testified in support of the legislation.
The state was experiencing tough economic times, which
meant the union had seen members move from the state for
work in other locations. He felt an increase in the benefit
would retain the Alaskan workforce.
3:16:36 PM
KEVIN MACKY, IBEW LOCAL 1547, WASILLA (via teleconference),
spoke in favor of the bill. He shared that about 220
members worked a seasonal career. The bill would be a major
benefit, especially in the winter. He was a constituent of
Representative Tilton. He spoke to the high cost of living
and low unemployment insurance.
3:17:50 PM
VINCE BELTRAMI, ALCSKS AFL-CIO, ANCHORAGE (via
teleconference), testified in support of the bill. The
current amount of $370 per week was over a decade old. He
said that due to inflation, people collecting that $370
rate had lost $62, per week. He stressed that Alaska was
behind most other states for wage replacement. The
organization had over 1,000 members working in the Lower 48
because they could not wait to find work in Alaska while
living under a paltry wage replacement. He referenced the
Alaska Workforce Investment Board that had submitted a
letter unanimously endorsing the bill. He referenced the
number of employers supporting the bill. He felt that if
the state was on the brink of building a new pipeline it
was necessary to have a workforce ready to work.
3:22:05 PM
Co-Chair Seaton CLOSED public testimony. He reminded
members of the amendment deadline of 5:00 p.m. on February
6.
3:23:19 PM
Representative Neuman queried the last time the
unemployment insurance had been raised.
Ms. Westcott answered that the last time the weekly benefit
amount had been raised in the state was effective January
1, 2009. Prior to that the maximum weekly benefit amount
had been $248.
3:24:11 PM
HB 142 was HEARD and HELD in committee for further
consideration.
Co-Chair Seaton discussed housekeeping.