Legislature(2003 - 2004)
05/19/2003 08:03 AM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
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HB 305-UNEMPLOYMENT COMPENSATION BENEFITS
VICE CHAIR SEEKINS announced HB 305 to be up for consideration.
REPRESENTATIVE TOM ANDERSON, sponsor of HB 305, explained that
the bill provides an 8.12% increase to the maximum weekly
unemployment benefit amount. This increase would be phased over
a three-year period and minimizes the impact to employers,
employees and the UI trust fund. He introduced the bill because
Alaska ranks 47th in the nation with a maximum weekly benefit of
$248. With the changes in the bill, Alaska will rank
approximately 28th in the nation. The fully increased maximum
benefit amount would be available to claimants earning $34,250
or more per year. The full impact of the increase in benefits
will not be reflected in employer tax rates until 2010, which
was a concern in the House. When the cumulative impact of the
costs is included in a tax rate calculation by 2010, the average
employer tax rate will increase by .17% and the average employee
tax rate will only increase by .04%.
COMMISSIONER GREG O'CLARAY, Department of Labor, pointed out
that the amount of money that goes into the state's economy per
year (for 2002) was nearly $127 million in unemployment
insurance checks. In the North Star Borough, $13,719,440 worth
of unemployment checks were cashed in 2002. In the Anchorage
Mat-Su area, $55 million goes into the local economy. The
increase they are looking at only affects about 3.28% of those
that actually collect benefits within the state. He noted:
I think that's important for you to underscore because
you'll hear those who oppose this bill and this
increase...because employers cannot stand this
increase. Believe me, this is a compromise piece of
legislation...
He said this bill moves the effective date to January 1 of each
year and that assists employers in adjusting costs in terms of
their taxes. It will not have any effect in FY04 and the maximum
it will cost per employee in 2005 is $5 per year.
COMMISSIONER O'CLARAY said:
We are mainly concerned about keeping our skilled
workers in Alaska and we're starting to lose them
because they cannot afford to maintain their residency
in Alaska during the slow-down in work in the winter
when they would draw their UI benefits and they are
migrating to other portions of the United States where
the cost of living is cheaper. That is a major problem
for the construction industry because, if we are - and
this governor has indicated he wants to build some
roads - and I support that - we're going to be seeing
some heavy construction. We need those craftsmen in-
state - because the other concern our department has
is with respect to the amount of non-residents that
come to Alaska that work in our high paying jobs in
the construction industry. Those dollars all go south
and so it's our goal in the department to increase the
amount of resident workers and to not only build, but
maintain our resident work force in Alaska. So, I
would encourage the committee to move this bill.
SENATOR FRENCH asked how they will put off the increase of
benefit costs and keep them from being reflected in employer tax
rates until 2010.
MR. PATRICK SHIER, Chief, Employment Security Tax Division,
explained that the whole rating system is a look-back system.
When rates are set for 2004, they look back at half of 2003 and
prior.
SENATOR FRENCH said this bill has a three-year phase in at 2003.
He thought the whole increase would be phased in by 2006 and
asked if it will use a four-year look-back period.
MR. SHIER added that there is also a mechanism in the rating
system that depresses any called-for increase by using an
average of the prior three years. He surmised, "So, the full
effect, yes, is not expected to be fully represented in the
rating process until 2010."
SENATOR FRENCH asked if this is the way most UI programs are
administered in other states.
MR. SHIER replied that they are everywhere. He told members:
For example, in 1985-87, we were having some
difficulty here in the state of Alaska and employer
rates did not go up until we had actually turned the
corner and begun to come out of there because of this
statutory rating process that takes a three-year
average.
VICE CHAIR SEEKINS asked where the money comes from that comes
out in UI benefits. He questioned, "Doesn't it come out of the
economy before it goes back into the economy?"
COMMISSIONER O'CLARAY replied yes and explained:
Obviously, 80% of the rate comes out of the employer's
pocket and 20% of the UI tax comes out of the
employee's.
VICE CHAIR SEEKINS responded:
As an employer, I tell you it all comes out of the
employee's pocket. It comes out of his pocket, because
if I wasn't paying it in, I'd be giving it to him more
than likely. It would be negotiable for him. It's his
money.
He added that he thought the construction industry had been that
way historically in Alaska but is probably better now than it
ever was in the past because of new technology. He pointed out
he has seen buildings being built in tents in Anchorage in the
wintertime. When he worked in construction, workers were laid
off in the wintertime.
COMMISSIONER O'CLARAY responded that there have been good years
in construction and this looks like another good year. With
highway construction, there could be even better years. He said:
The main impact, though, is not necessarily on
construction trades. The service industry is one that
gets hit very heavily, especially in tourism, because
of the seasonality of that type of work.
SENATOR STEVENS commented that Alaska would be ranked 28th in
2006, but that's assuming no other states change their
unemployment rates.
MR. SHIER explained the differences in the charts before the
committee and said there would be some movement in the rankings.
It is not an absolute scale. He did not include dependents
allowance in the calculations.
VICE CHAIR SEEKINS asked if they are talking about families with
dependents allowance.
COMMISSIONER O'CLARAY responded that there is a dependent
allowance of $24 per week per dependent with a maximum of three
paid to claimants.
MR. DON ETHERIDGE, AFL-CIO, supported HB 305.
VICE CHAIR SEEKINS said that years ago, an operator made more on
an Alaska job than elsewhere because they knew they weren't
going to have that employment in the wintertime. He asked if
that is still the case.
MR. ETHERIDGE replied that is still the case, but "It's
tightening up more all the time."
MS. PAM LABOLLE, President, Alaska State Chamber of Commerce,
said this bill is a compromise of another bill that was
introduced and discussed two years ago. The Chamber supported
the first step then, of $24 and halfway with the second step (a
12% increase from what the bill is proposing now). Almost a
third of the UI payments were at the maximum amount in 2001 and
nearly half included some dependent allowance. Eleven percent of
claimants were paid the full dependent allowance.
MS. LABOLLE reminded the committee that there was also a minimum
wage increase last year and an increase in business license fees
that would impact employers as well. She said further that 16
states have a rule that if you're unemployed during the time of
your seasonal work, that's when you can collect benefits, but if
you are unemployed out of season for that seasonal work, you
can't receive benefits. She stated, "Alaska is very lenient in
that they pay unemployment insurance benefits when the kind of
work you do isn't even available."
She encouraged the committee to get a full picture of what the
full cost is both to the tax rated employers and to the
reimbursable employers before they pass this legislation. She
said it would immediately impact the state's budget and thought
taking it half way would still have Alaska in the upper quarter
of the maximum weekly benefit amount compared to other states.
VICE CHAIR SEEKINS asked Commissioner O'Claray about the fiscal
impact of the change on the state treasury. One fiscal note
indicated zero, which he thought meant the cost of
administration of the program would not increase as a result of
a change in the rate.
COMMISSIONER O'CLARAY said that was correct.
VICE CHAIR SEEKINS asked if there was an estimate of the impact
a change would have on the treasury.
COMMISSIONER O'CLARAY replied that the bill that didn't pass
last year or the year before had an increase on the first
increment of $175,000 to the state for FY03. That was for half a
year. He explained, "If you follow that number, your increase
for 12 months in 2004 would be under $300,000. He questioned the
correctness of Ms. LaBolle's figures for the Alaska Railroad.
He said he was trying to avoid getting into an argument with
advocates from the Chamber of Commerce, because in the 38 years
he had been coming before this legislature, he had never once
seen the Alaska State Chamber of Commerce agree to any increase
in benefits to workers.
VICE CHAIR SEEKINS asked Ms. LaBolle if the information from the
Alaska Railroad Corporation information was correct and said if
it is, then a fiscal note should reflect that.
COMMISSIONER O'CLARAY responded that is correct, but he also
knew of the game that is played with fiscal notes. He stuck by
the numbers he had just quoted.
MS. BARBARA HUFF-TUCKNESS, Director, Legislative and
Governmental Affairs for Teamsters Local 959, said during the
last 20 years, unemployment insurance has actually increased
four times. The last time was in 1997. She said:
I would like to reiterate on record that we are one of
three states that actually has employees that do
contribute along with employers to this particular
benefit program. Additionally, I would also like to
reiterate that it is a partial wage reimbursement. It
does benefit those workers who are in the unfortunate
situation of being unemployed temporarily - that they
can have a partial wage benefit that's going towards
covering those life necessities out there such as
shelter, utilities, food and clothing, which, of
course, does go back into the business community.
She said that sometimes workers don't plan to be unemployed and
having a benefit designed to protect them during that time is
something she wanted the legislature to support. For the record,
she was a participatory member of the quasi-task force that had
six meetings over the last two or three months prior to
introduction of this legislation and there is strong support
from AGC, VECO and others. She reiterated that this is a
compromise bill and is not the one they wanted to see
introduced, but they are supportive of it.
MR. RON PECK, President, Alaska Travel Industry Association,
said the vast majority of the businesses he represents are small
and have had a challenging last season. The prospects for next
year are not much better. He noted, "All sectors of our business
are in a state of decline." He said that labor costs comprise a
significant portion of their business operations and they are
facing an increasing minimum wage. These are very challenging
times for Alaskan tourism. He thanked them for this opportunity
to speak.
VICE CHAIR SEEKINS said the last time this legislation came
through it had a fiscal note and this time it doesn't. He
announced an at-ease to find out what the leadership's intent
was.
9:40 to 9:56 a.m. - at ease
VICE-CHAIR SEEKINS said that a fiscal note was needed and that
they would hold the bill in committee until the commissioner
prepared it for them.
TAPE 03-38, SIDE A
SENATOR FRENCH asked if this bill has a Senate Finance Committee
referral. He suggested in the interest of efficiency the
committee send the bill there to wait for the fiscal note.
VICE CHAIR SEEKINS said leadership preferred that it stay in
this committee. There being no further business to come before
the committee, he adjourned the meeting at 10:00 a.m.
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