03/27/1997 03:35 PM Senate STA

                                                                               
               SB 116 WELFARE TO WORK TAX CREDITS                             
                                                                               
 CHAIRMAN GREEN  brought SB 116 before the committee.                         
                                                                               
  JIM NORDLUND , Director, Division of Public Assistance, Department           
 of Health & Social Services, explained the legislation would offer            
 tax credits to Alaskan corporations that hire disadvantaged                   
 workers. He said welfare recipients is one of the categories of               
 disadvantaged workers that this legislation would help the most.              
 In order to comply with federal law, there is a need to put                   
 approximately 4,000 individuals into a work activity within the               
 next year.                                                                    
                                                                               
 SB 116 allows an Alaskan corporation to use as a credit up to 15              
 percent of an employee's wages or up to $1,000 of wages paid in a             
 year.  There is an additional $500 credit if that employer offers             
 training to that recipient.  To earn the credit, the employee must            
 be on the job for 180 days or 400 hours.  Mr. Nordlund pointed out            
 that they don't need to be consecutive days, taking into account              
 the seasonality of employment in Alaska.  It was also pointed out             
 that the Alaska Welfare to Work program mirrors the federal work              
 opportunity tax credit bill.                                                  
                                                                               
 Mr. Nordlund said SB 116 is one of several incentives the                     
 Administration is looking at because there are a number of tools              
 they need to have at their disposal to encourage the employer                 
 community to hire welfare recipients.                                         
                                                                               
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 Responding to an inquiry by Senator Ward,  MR. NORDLUND  explained            
 that to the extent that an employer takes advantage of this                   
 provision and hires a welfare recipient, that welfare recipient is            
 then going to not receive as much money in welfare benefits because           
 of being employed and becoming self-sufficient.  There is a cost to           
 the state in the sense that there is a credit that's given to that            
 employer for hiring that recipient, but that would be offset by the           
 dollars that the recipient is earning on the job as opposed to                
 being paid in welfare benefits.                                               
                                                                               
  CHAIRMAN GREEN  asked if this program was reflected in any of the            
 budget proposals.   MR. NORDLUND  advised that the Governor's budget          
 predicts a $2 million reduction in benefits that takes into                   
 consideration a number of different factors, one of which is the              
 possibility of SB 116 passing this Legislature.                               
                                                                               
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  BOB BARTHOLOMEW , Deputy Director, Income & Excise Audit Division,           
 Department of Revenue, speaking to the fiscal note, said the                  
 Department of Revenue worked with the Department of Health & Social           
 Services to try to estimate what would be the impact of this                  
 legislation.  The biggest issue was that not all businesses in                
 Alaska are corporations, so this incentive relates to corporations            
 that are registered to pay taxes in Alaska.  They estimate that               
 approximately 880 workers will go work each year, which is a best             
 guess, high end estimate.  If that were the case, the fiscal note             
 reflects that corporations would have a $1 million a year reduction           
 in taxes because of hiring employees that are eligible for that               
 program.                                                                      
                                                                               
  TAPE 97-15, SIDE B                                                           
 Number 001                                                                    
                                                                               
 Mr. Bartholomew pointed that currently the federal government                 
 allows for a federal work opportunity credit, which the state has             
 never adopted in the past.  It is just by the event that the state            
 adopted the Federal Internal Revenue Code that it gets their tax              
 credit along with it, so the state has been losing tax revenues               
 every year because of people taking the federal credit and then               
 flowing it to their Alaska return.  SB 116 repeals that adoption of           
 the federal tax credit and provides that if Alaska wants a credit,            
 it will adopt its own.                                                        
                                                                               
 Mr. Bartholomew noted there was a lot of discussion amongst the               
 agencies and with individual businesses about how to keep the                 
 process simple and keep the paper work down.  As there is currently           
 a federal program that employers use, those requirements have been            
 adopted, so there is no new paper work or new Alaska guidelines.              
                                                                               
 Number 546                                                                    
                                                                               
  JOSEPH FREIDMAN , testifying from Anchorage, said he was                     
 representing the Trade Dollar Exchange in Anchorage, which is a               
 program created by private industry to assist small Alaskan                   
 businesses with programs such as the Alaska Welfare to Work                   
 program.  It provides the opportunity for a lot of these people who           
 must go to work at a minimum of 20 hours a week an opportunity  to            
 go into a small business where the business owner will provide the            
 role modeling and the mentorship to make the transition successful.           
                                                                               
 Mr. Freidman said their program is very dynamic in the way that it            
 activates the community and presents a forum for the low income               
 people to actually work together to help each other.  He said to              
 provide the successful transition for these people, he thinks it is           
 small business that can do it and private industry needs to take              
 the lead.  He suggested providing a disregard for trade dollars               
 that these people earn so as not to reduce their cash benefits and            
 deter them from going to work.                                                
                                                                               
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  COMMISSIONER WILLIAM HENSLEY , Department of Commerce & Economic             
 Development, testifying from Anchorage, said he has spent a great             
 deal of time in the last few weeks working with the Department of             
 Labor and the Department of Health & Social Services on this issue            
 of welfare to work, and he believes it is a problem that business             
 and industry is going to have to help government with.  He has also           
 talked with a number of businesses in the private sector and they             
 are universally supportive of working with the state on this                  
 subject, but he believes small business is the real key to putting            
 these people to work.  He said if these people are given the proper           
 support systems and if they stay on the job, they have an                     
 opportunity to become productive.                                             
                                                                               
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 There being no further testimony on SB 116,  CHAIRMAN GREEN  stated           
 the bill would be held and scheduled for another meeting.