Legislature(2007 - 2008)BELTZ 211
03/22/2007 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SJR4 | |
| SB121 | |
| SB120 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 120 | TELECONFERENCED | |
| += | SJR 4 | TELECONFERENCED | |
| += | SB 121 | TELECONFERENCED | |
SB 120-UNEMPLOYMENT COMPENSATION BENEFITS
1:51:33 PM
CHAIR ELLIS announced SB 120 to be up for consideration.
DANA OWEN, staff to Senator Ellis, explained that this bill was
brought before them because of the state's failure to raise the
maximum weekly benefit amount under unemployment insurance since
1997.
Section 1 extends the schedule of payment amounts and raises the
maximum weekly benefit amount from $248 to $370. Section 2 sets
out the method of determining how many weeks of benefits a
person is eligible for. It includes in section 3, for
eligibility, persons who fall under a new section (h).
Section 3 allows for increases in the maximum weekly benefit
amounts as wages increase - specifically the maximum weekly
benefit increases by $2 and the highest base period wages by
$250 - when average wages have increased by an amount
established by the Department of Labor. Weekly benefit amounts
are capped at 50 percent replacement of average weekly wages.
This section also provides for a public notice of these changes;
but that notice is exempted from provisions of the
Administrative Procedures Act that normally apply with
regulations.
It also provides that if the average wage decreases to the
extent that adjustments to the benefit amounts would be
appropriate to protect the trust fund, the commissioner is
obliged to report to the governor and the legislature. This
section also provides a method of determining the average weekly
wage.
1:53:15 PM
Section 4 is transition language that allows the department to
begin adopting regulations immediately. Section 5 sets an
immediate effective date for section 4 and section 6 has a
January 1, 2008 effective date for all of the rest of the bill.
1:53:36 PM
MR. OWEN stated the reason for the bill is that Alaska lags
other states in providing unemployment insurance benefits that
replace wages lost when a person loses his or her job. A
Department of Labor and Workforce Development's "Alaska Economic
Trends" article shows that Alaska is dead last among the states
in the ability to replace wages lost from unemployment. It is
ahead of only the District of Columbia in that regard. He highly
recommended reading the article for further background on this
issue.
He further informed them that the maximum benefit amount has
been frozen since 1997. And since 1984, the Anchorage Consumer
Price Index has risen 71.6 percent. Meanwhile the maximum
benefit amount over that time has risen only 32 percent.
1:54:46 PM
SENATOR BUNDE asked if this version contains any references to
actively seeking work.
MR. OWEN replied that this bill doesn't address that.
CHAIR ELLIS added that he was open to working with Senator Bunde
and others to include some of those kinds of improvements to the
bill.
SENATOR BUNDE mentioned that Alaska is one of the few states
that allows people who are fired for cause to seek UI benefits
and asked if that was addressed here.
1:58:27 PM
PAT SHIRE, Chief, Employment Security Tax Division, Department
of Labor and Workforce Development (DOLWD), said he wrote the
"Alaska Economic Trends" article the committee was referencing
and offered to answer questions about the financing or taxation
provisions of the UI program.
SENATOR HOFFMAN asked if this legislation passed, where Alaska
would stand among the state rankings in terms of unemployment
insurance (UI) payments.
MR. SHIRE estimated that Alaska would fall roughly in the
middle.
CHAIR ELLIS noted: "Not on top; not on bottom; just a less
embarrassing place than we are today."
SENATOR STEVENS stated that the "Alaska Economic Trends" article
also said that Alaskans use unemployment insurance more than
most other states do.
MR. SHIRE went to page 8 of the "Trends" publication and said
Alaska has an extraordinarily high recipient rate compared to
other states - 53 percent of the workers participate in the
program.
CHAIR ELLIS asked Mr. Shire to explain how the program works.
2:01:45 PM
MR. SHIRE explained that the division is charged with helping
employers report and pay the proper amount of unemployment tax
so there are sufficient reserves according to AS 23.20.010.
Using those reserves, money can go to those local economies when
people become unemployed, because it's not only the unemployed
workers who suffer in those times, but the local business people
that would otherwise see a greater drop in their income.
Employers also tell him that the UI program helps keep qualified
workers in the local economy so that when it turns around they
don't have to look outside the state or their economic areas for
workers and have to entice them back in with even larger pay
scales and moving costs.
SENATOR STEVENS asked on page 7 if the department has the
ability to change weekly benefits without legislative approval
and asked Mr. Shire if that was a new provision.
MR. SHIRE replied that is a new provision.
SENATOR STEVENS asked him to defend that change.
MR. SHIRE replied that there are reasons to embrace it and also
reasons to examine it carefully. The fact that it's indexed
would keep the department and legislature free of the burden of
having this discussion periodically. On the other hand, he
understands that others are concerned about increased benefits
and this is an opportunity for them to weigh in before a
legislative body.
2:04:01 PM
SENATOR BUNDE rephrased that it's an opportunity for the
department to do a cost of living adjustment without involvement
from the legislature.
MR. SHIRE replied that it would have that effect.
SENATOR BUNDE said he has often heard that Alaska has the lowest
benefits, but one of the more generous and easier plans to take
advantage of. He asked if it includes dependent benefits.
MR. SHIRE replied it does and that approximately 43 percent of
individuals who claim benefits also claim a dependent and 10
percent of those claim the maximum number of three or more
dependents.
SENATOR BUNDE asked if that is used to calculate the average
benefits compared to other states.
MR. SHIRE deferred that question to his colleague, Jim Wilson.
SENATOR BUNDE said if UI benefits go up, it is likely the
employee contributions would go up as well and that there is
probably a hidden tax on the worker as well as the employer.
MR. SHIRE replied yes, "Statutorily, as close as we can get to
20 percent of the cost of the program must be borne by workers."
CHAIR ELLIS noted the great seasonality of the Alaska workforce
and that businesses struggle to pay their taxes. However there
is also a benefit to seasonal employers to be able to retain a
workforce in the state and not have "to bring the college kids
in or entice them in." He asked, given the great seasonality of
our work force compared to many other states, if aspects of a
different model UI system could better balance those pressures
on small and medium-sized employers - anything that would help
the committee make this reasonable legislation from a worker's
and an employer's perspective. He said the bill would be held
over so those issues could be considered further.
MR. SHIRE said he appreciated that.
SENATOR HOFFMAN asked the average of the highest pay range for
the four other states, noting that SB 120 adds a range from
$26,750 to $42,000. He asked if other states have that range.
MR. SHIRE said he didn't have that information at his
fingertips, but he would get it for him.
CHAIR ELLIS said he hoped to accomplish something this year and
all these items are open for discussion. He was interested in
his professional opinions and suggestions for improvement.
MR. SHIRE commented that seasonality isn't the only issue.
Alaska has suffered "economic chilling" in the past and during
1985 - 87 when he owned a business, the UI trust fund paid out
$500 million into economies all over Alaska. "Depending on how
you measure it, it was the third largest employer." The fund
paid out $100 million more than it took in, which is what the
reserve is designed to do. He thought it was instrumental in
keeping many individuals hanging on until things began to
improve.
2:09:35 PM
JIM WILSON, Unemployment Insurance Actuary, Department of Labor
and Workforce Development (DOLWD), said he is an economist and
author of the "Alaska Economic Trends" Article. He offered to
answer questions.
SENATOR HOFFMAN restated his question regarding what upper
limits other states have.
MR. WILSON replied that other states use a variety of
calculations to determine their benefit amounts. In some manner
they are tied to wages earned. In some cases they are on the
high quarter and some do it on an annual basis. He could get
that information for them also.
He explained that Alaska has a corresponding increase in the
benefit schedule of $2 for every $250 increase in wages. It
starts at the bottom where $1,000 qualifies a person for the
minimum benefit amount of $44 a week. That goes up and tops out
at a maximum benefit of $248 per week. A few other states have
maximum benefit amounts that are roughly twice that of Alaska's
- like Washington and Oregon.
CHAIR ELLIS asked how Alaska compares to other states on the
West Coast.
MR. WILSON answered that he compared Alaska's maximum benefit
amount to Washington, Oregon, California, Nevada, and Hawaii;
Alaska came in last.
CHAIR ELLIS asked how often other states adjust their benefit.
MR. WILSON replied that he frequently sees changes in the data
from other states; so there's a constant revision in the
schedules.
SENATOR BUNDE asked if 20 percent of the UI program is borne by
the laborer, is the other 80 percent borne by the employer or
does interest earnings help support the program.
MR. WILSON replied the way the formula works is that the system
tries to recapture the average cost of benefits that have been
paid out for the last several years. Once that amount is
determined, employers basically are responsible for paying 80
percent and employees 20 percent. The trust fund does receive
interest earnings on a quarterly basis; that has the effect of
boosting the value of the trust fund, which, in itself becomes
part of the tax calculation - but only when the value of the
trust fund falls below a target window. Now they attempt to keep
the balance of the trust fund equal to about 3.2 percent of the
total value of wages in the Alaska economy. So, as wages grow in
the Alaska economy, the ideal is that the trust fund will keep
pace - the idea being the fund would have sufficient reserves to
cover a traumatic episode like Alaska experienced in 1986 and
87.
SENATOR BUNDE asked if the interest of the trust goes back into
it until a certain cutoff point.
MR. WILSON replied that any interest earned on a quarterly basis
goes back into the trust fund and helps to keep it balanced at
the level desired by the financing system. He didn't think there
was a tax relief feature, because the program is trying to
replace the amount of benefit dollars that are paid out.
SENATOR BUNDE asked if he hoped for a 10 percent return, like
the Permanent Fund, with 4 or 5 percent going back into the
trust.
MR. WILSON replied that the return to the trust fund based on
interest payments is determined by the federal government that
is the authority that actually holds the funds in the U.S.
Treasury.
CHAIR ELLIS asked how he would characterize the overall health
of the fund today.
MR. WILSON replied that the fund is healthy in general. He
explained that a solvency element to the employers' tax is in
effect, which meant the value of the trust fund needs to improve
slightly.
2:17:54 PM
SENATOR STEVENS asked him to comment on advantages or
disadvantages to giving the department the ability to make
increases or to establish a methodology to calculate amounts
that increase the weekly benefits.
MR. WILSON replied that feature would be new in Alaska's system.
One of the advantages would be similar to what Mr. Shire stated;
it would relieve the department and the legislature of the need
to come back and have a discussion about increasing benefits. It
would provide an automatic adjustment based on the economy,
specifically the growth in wages. However, he didn't know if
that would be the same as the growth in the CPI.
2:19:18 PM
CHAIR ELLIS announced that he was planning on some work sessions
in a less formal setting on this issue and trying to achieve
some sort of consensus on legislation.
SENATOR BUNDE said he appreciated the "Trends" article and went
to page 10 and asked Mr. Wilson if he considered not allowing
firing for cause to be eligible for benefits.
MR. WILSON replied that the committee could look at the
eligibility provisions although he didn't have any
recommendations.
2:21:23 PM
SENATOR BUNDE asked whether benefits to dependents are figured
into the national scale.
VINCE BELTRAMI, President, AFL-CIO, said this bill is long over-
due saying, "Alaska has been stuck at the bottom of the barrel
in terms of how we've taken care of our hard-working employees
who find themselves out of work and having to rely on
unemployment insurance."
He said that obviously unemployment income is not intended to be
a wage replacement and they don't want to create disincentives
to go to work.
SB 120 goes quite a ways, I won't say it goes a long
ways in restoring fairness and dignity of the
hardships that result from lost wages during periods
of involuntary unemployment. And as I'm sure all of
you are aware, while Alaska has enjoyed generally high
wages, we've slipped over the years. We're currently
th
18 in average weekly earnings among the 50 states.
Our maximum weekly benefit is near the bottom and as a
ratio against the average weekly earnings, as we've
also heard, dead last amongst the 50 states. To
Senator Hoffman, through the chair, you asked about
where that would put it for Alaska. With the increase,
if this bill were to pass in its present form, my
simple math puts it at 49.3 percent of weekly earnings
as a ratio, which would put us at 29 amongst the 50
states, still not quite the top half.
And of course with the sliding scale that's proposed,
many Alaskans still wouldn't qualify for the maximum
benefit. But SB 120 is definitely a step in the right
direction....
Those statistics are all fine and dandy, but obviously
as a group of fiscally responsible legislators, you're
looking at cost benefit analysis and the question is
can we afford the increase as a state at this time.
And I think the answer is an emphatic yes. We can
afford it more easily this time than any time in the
last several years from the research that I've seen.
UI benefits that I've seen paid out have been trending
down since 2003 and the trust fund deposits are
significantly up. If I look at this graph I have in
front of me that came out of the employment security
division, it looks like the fund has grown in 2003
that it was a little below $200 million; and right now
it looks like it's roughly around $275 million or so.
The bad news for the Alaska worker is that despite low
unemployment generally, the cost of living continues
to increase in a fashion that is outpacing income and
in some parts of the state and particularly in some
parts of rural Alaska unemployment ranges from 50 - 80
percent in some places - which is just an atrocity.
This increase would help offset some of that loss of
purchasing power and, in fact, one of the primary
benefits an increase in the UI income can help
stabilize local economies by putting more money into
the economy.
MR. BELTRAMI said the benefit increase would not increase the
employer contributions for potentially several years. A few
years ago he was business agent at the IBEW and a number of
electricians from Washington were working seasonally. A number
of them wanted to plant roots here, but they were unwilling to
wait the winter out to establish their residency when they had
qualified unemployment benefits at home that were double what
they would get here. At the same time, a number of local
electricians were also faced with the option of waiting for work
through the winter seasonally and opted to go to work that was
available in Oregon and Washington - one of the reasons being if
they were laid off, they would have a much better benefit down
there - and they would much rather sit through the winter down
there. Unfortunately a couple of them have yet to return,
because that is what happened.
He said at a time when Alaska is trying to figure out how to
increase workforce development efforts and bring more skilled
workers into the workforce to prepare them to construct a gas
pipeline, it's imperative that some of these obstacles get
removed that drive people away or lure them to other states.
2:27:53 PM
CHAIR ELLIS asked if the UI benefit is a significant factor in
state to state competition for skilled workers.
MR. BELTRAMI replied yes.
2:28:36 PM
DENNIS DEWITT, State Director, National Federation of
Independent Business, opposed SB 120 and one of the main reasons
was that the cost would fall to small employers. However, he
suggested some things that would make it more neutral to them.
Senator Bunde mentioned several of them in terms of the period
between separation and payment for those who choose voluntarily
to leave or are discharged and recognizing the relationship of
the benefit to the income derived from minimum wage would be
another. He did not want to see the UI benefit exceeding the
minimum wage making it more advantageous to not work that to
seek employment. He was also concerned about the indexing in SB
120 and said he believed that was a legislative prerogative that
ought to stay there.
He said the probability of a substantial employment boom around
the gas pipeline will increase the average weekly wage in Alaska
atypically and probably ought not to be something that drives a
change in the UI program through a formula.
2:32:03 PM
SENATOR STEVENS asked what eligibility provisions he would
suggest.
MR. DEWITT responded that he was working on putting those
together.
2:32:47 PM
ROYCE ROCK, Business Manager, Carpenters Local 1281, referenced
the "Trends" article that said the objective of the UI system is
economic stability for both businesses and individuals and how
the Alaska UI program with the amount that is being paid now
isn't stabilizing anything right now. It concerns him greatly
when one of his sons has a $1,200 house payment and an
unemployment payment that doesn't even cover two-thirds of it.
MR. ROCK said one of the reasons for making the adjustments
automatic is that it would take politics out of the equation. In
the past years, especially in the Senate, there is the
philosophy that someone would quit a $1,200 - $1,300 a week job
to draw $248 in unemployment. "This isn't politics, folks. This
is people's lives we're dealing with...."
He said this bill does a lot as far as what the bottom line is -
$370 versus $248, but the truth of the matter is in the proposed
2001 bill the maximum benefit amount would have raised to $284
with an income of $31,250. The 2007 proposal before them doesn't
raise anything from that. What has really changed is the maximum
amount one must earn in order to get the highest UI payment.
MR. ROCK said, "I'm retiring from the carpenters. You've wore me
out. I've tried everything in my power to make this bill pass.
We have attempted to make a bill that helps both labor and
management."
He remarked that Mr. DeWitt says this is increase is a burden on
small businesses, but he remembers when Mr. DeWitt worked for
Representative Mulder who passed a bill to spend $10 million out
of the Unemployment fund for the AVTEC Center in Seward and
Kotzebue.
MR. ROCK said Senator Hoffman wanted to know where this change
would put Alaska compared to other states, but at this point he
said:
You know folks, I really don't care. I am embarrassed
that we're at the bottom of list, but I think what we
need to look at is how this helps our people instead
of what number we are, what anything. If we're at the
bottom of list, then our economy is at the bottom.
2:39:15 PM
BARBARA HUFF-TUCKNESS, Director, Governmental and Legislative
Affairs, Teamsters Local 959, supported SB 120. She said she
didn't need to add too much more to previous testimony. She
thought a few might take advantage of the program even at the
maximum salary of $370 a week, but she didn't know too many
folks who were being paid $25 or $35 an hour that would give up
that kind of a job to receive that kind of a benefit. It doesn't
make sense. It even doesn't make sense at the lowest
denominator.
MS. HUFF-TUCKNESS said everyone needs to remember the impact is
out there. It will be an increase, but it won't be immediate and
is projected out over quite a few years when all workers would
be paying the increase. She said Alaska is one of three states
that require working people to pay into the unemployment
insurance fund. She personally thought working people supported
that as an interim cushion. She encouraged the committee to work
through the issues because it's a very important piece of
legislation that she would be proud as a working person in this
state to see pass after 10 years.
CHAIR ELLIS thanked her for being with them. He adjourned the
meeting at 2:43:31 PM.
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