Legislature(2021 - 2022)BELTZ 105 (TSBldg)
02/04/2022 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB159 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 159 | TELECONFERENCED | |
SB 159-UNEMPLOYMENT BENEFITS
1:30:43 PM
CHAIR COSTELLO announced the consideration of SENATE BILL NO.
159 "An Act relating to unemployment benefits."
She noted that this was the first hearing and there was a
committee substitute (CS) for the committee to consider.
1:31:10 PM
SENATOR REVAK moved to adopt the Committee Substitute (CS) for
SB 159, work order 32-LS1313\I, as the working document.
CHAIR COSTELLO objected for discussion purposes.
1:31:34 PM
MELODIE WILTERDINK, Staff, Senator Mia Costello, Alaska State
Legislature, Juneau, Alaska, presented the changes from version
B to version I of SB 159:
[Original punctuation provided.]
Sec. 3 AS 23.20.350(e) Page 2, Lines 17-31, & Page
3, Lines 1-12
Version I revises the unemployment benefit duration
scale by starting at 5.00 percent instead of 7.00
percent, with 14 weeks of benefits instead of 12
weeks. It extends the scale to a total of 26 weeks
from 20 weeks.
Sec. 4 AS 23.20.350(g) Page 3, Lines 13-16
Version I changes the definition used for "state
average unemployment rate" from the average seasonally
adjusted unemployment rate for the third quarter of
the calendar year, to the average seasonally adjusted
unemployment rate for the most recently completed
quarter.
1:32:18 PM
SENATOR MICCICHE joined the committee.
1:33:37 PM
CHAIR COSTELLO removed her objection. Finding no further
objection, version I was before the committee.
1:33:59 PM
MS. WILTERDINK introduced SB 159 reading the sponsor statement
for SB 159:
Unemployment insurance exists to provide Alaskans with
necessary income when we are between jobs. The State
of Alaska's current system determines how many weeks
of benefits each Alaskan receives based on work
history. Looking at the first four of the last five
quarters, an individual who worked during all of them
would receive more weeks of benefits than someone who
worked seasonally or recently entered the workforce
but was laid off.
By basing this critical lifeline on prior work
history, the current unemployment system does not take
into account whatsoever whether there are actually
jobs available.
Instead of allotting weeks of benefits based on past
work, Senate Bill 159 would base weeks of benefits on
the unemployment ratetying the duration of benefits
to whether there are employment opportunities or not.
SB 159 does not change the weekly dollar amount of
benefit each individual is eligible to receive, just
the length of time the benefit is available.
When there are few jobs available, whether someone
worked annually or seasonally over the past year does
not matterfinding a new job will be difficult.
Similarly, when the economy is growing and many jobs
are available, finding employment is easier. SB 159
would treat all Alaskans who are facing unemployment
equally by considering the job market they are facing
when determining the duration of benefits.
Determining weeks of unemployment benefits on whether
jobs are available would save valuable resources when
jobs are abundant in order to distribute a greater
number of weeks of benefits to every Alaskan when jobs
are difficult to find.
1:36:09 PM
SENATOR STEVENS asked if the benefit is tied to the type of job
a person had as well as the fact that they are unemployed. He
related that in Kodiak, jobs are readily available during the
fishing season because the cannery almost always has openings,
at least on the slime line. However, an unemployed accountant
may not want to take that kind of position.
MS. WILTERDINK answered that the unemployment system does not
look at the type of job and the bill does not address that
issue. She deferred further explanation to Patsy Westcott who is
familiar with state and federal laws and may know whether or not
that type of distinction would be legal.
SENATOR STEVENS narrowed his question asking if an unemployed
person could turn down a job and still receive unemployment
benefits.
1:37:44 PM
PATSY WESCOTT, Director, Division of Employment and Training
Services, Department of Labor and Workforce Development (DOLWD),
Juneau, Alaska, asked him to restate the question.
SENATOR STEVENS related his experience that jobs are readily
available in his community during fishing season. He asked if an
individual who is unemployed has to apply for jobs for which
they are overqualified.
MS. WESTCOTT answered that all states have provisions in their
laws regarding refusal of suitable work. If somebody refuses a
legitimate job offer, the division looks at the suitability of
the work that was offered and whether or not the individual has
the skillset, training, or education to perform the work. If the
division determines the work is suitable for the individual,
their eligibility to receive benefits is affected. Similarly, if
the division determines the job offer was not suitable, the
individual would be allowed benefits.
1:39:40 PM
CHAIR COSTELLO asked if she could provide data on the
unemployment rates during different periods and the duration of
benefits that Alaskans received during those specific periods of
unemployment.
MS. WESTCOTT agreed to follow up with the information.
CHAIR COSTELLO asked her to briefly explain the existing program
for unemployment benefits.
MS. WESTCOTT asked if she was asking how the duration of
benefits is calculated or for an overall explanation of the
unemployment insurance program.
CHAIR COSTELLO replied the calculation for the duration of
benefits
MS. WESTCOTT explained that the duration of benefits calculation
is based on the wages an individual earned in their base period,
which is the first four of the most recent five quarters at the
time an individual files for unemployment insurance. A ratio
methodology is applied to determine the maximum number of weeks
an individual would be eligible. The maximum duration is 26
weeks and the minimum duration is 16 weeks. An individual whose
wages are consistent from quarter to quarter will be assigned a
higher duration of benefits than an individual whose wages are
inconsistent over the base period. She noted that this statutory
language predates her 28 years with the department.
1:44:32 PM
SENATOR GRAY-JACKSON referred to Senator Stevens question about
job suitability. She asked what the definition is for "suitable"
and whether a job on the slime line in a cannery would be a
suitable job for an accountant.
MS. WESTCOTT replied it is not a simple yes or no answer because
every case is individualized. However, the department tries to
place people in a similar position or occupation moving forward.
1:46:30 PM
CHAIR COSTELLO reminded the committee that SB 159 solely deals
with the duration of the benefit, not the monetary amount of the
benefit.
SENATOR GRAY-JACKSON asked for the agency's definition of
suitable.
MS. WESTCOTT agreed to provide the factors the department looks
at in determining suitability of work.
1:47:28 PM
SENATOR MICCICHE asked if the size of the benefit ranges
dramatically if a person earned $75,000 per year versus a person
who earned $30,000 per year.
MS. WESTCOTT answered that the size of the wage earned during
the base period does affect the size of the weekly benefit. The
range is from $56 per week to $360 per week.
CHAIR COSTELLO advised those who were following along that the
documents attached to the bill included a calculation worksheet
for the weekly benefit amount and duration along with a benefits
table.
1:51:47 PM
SENATOR STEVENS mentioned anecdotes he'd heard since Covid about
people who take unemployment but have no intention of returning
to work. He asked if those stories are accurate.
MS. WESTCOTT answered that she asked the department's research
and analysis section to do a study on what is being referred to
as the "great resignation" because the division knows that Covid
presented an opportunity to examine one's life and some
individuals decided to not return to the workforce. She said
that is a personal decision, but it does affect their ability to
collect unemployment insurance. A long-standing principle of
eligibility is that a person must be able and actively seeking
work.
SENATOR STEVENS asked how the division knows whether or not
someone is actively seeking work.
MS. WESTCOTT explained that individuals are required to conduct
weekly work searches and report those searches to the division
every week that they file for benefits. The division, through
the reemployment eligibility and assessment program, calls
people in to ensure that they are doing more than just going
through the motions of looking for employment. If the auditors
determine there is a need, the benefit control unit will conduct
an investigation.
SENATOR STEVENS said he appreciates that the division uses
auditors and investigators to ensure that the searches are valid
and the filings are legitimate.
1:56:23 PM
SENATOR GRAY-JACKSON asked what the state and employee each
contribute toward unemployment insurance.
MS. WESTCOTT replied it is a 73/27 split with the employer
paying 73 percent and the employee paying 27 percent.
CHAIR COSTELLO asked if the employer contribution has ever been
reduced.
MS. WESTCOTT replied the tax rate fluctuates from year to year
for both the employer and employee depending on the cost of
benefits in previous years. She deferred further explanation of
the tax rate to Lennon Weller.
1:59:00 PM
SENATOR STEVENS asked if the unemployment insurance fund was
healthy and what assurance there was that it would continue to
be sufficient to pay benefits.
1:59:29 PM
LENNON WELLER, Economist; Actuary, Unemployment Insurance (UI)
Trust Fund, Department of Labor and Workforce Development
(DOLWD), Juneau, Alaska, answered yes the (UI) Trust Fund is
fully solvent and has the ability going forward to absorb a
large majority of potential costs. The fund balance at the end
of December 2021 was $396.7 million, which is equivalent to just
over a 3 percent reserve ratio. The target reserve ratio is 3-
3.3 percent.
SENATOR STEVENS, noting that the current governor put funds into
the budget that were not expected, asked if the UI trust fund
was untouchable for anything other than benefits.
MR. WELLER replied any entity can deposit money into the fund
but once in the fund, the money may only be withdrawn to pay UI
benefits.
SENATOR STEVENS asked for assurances the money in the UI trust
fund is not "sweepable."
MR. WELLER stated that those funds are untouchable by federal
law.
CHAIR COSTELLO turned to invited testimony.
2:02:13 PM change
SCOTT CENTORINO, Senior Fellow, The Foundation for Government
Accountability, Naples, Florida, stated that he was also
appearing in his capacity as a visiting fellow with the
Opportunity Solutions Project (OSP). Previously he was an
assistant attorney general in Louisiana. He stated his intention
to add color to the effects of SB 159 and the experiences other
states have had.
MR. CENTORINO stated that his review of Alaska's tax policies
confirmed his suspicion that Alaska is ranked near the top of
nearly every list of pro-business, pro-worker states. Alaska has
shown that being a pro-business state is a matter of principles
and policy. He highlighted that The Tax Foundation has ranked
Alaska number three among states for its business tax climate.
Policies such as no income tax are a deliberate choice that
clearly say that Alaska is open for business. New businesses and
workers are welcome. He offered his view that pro-business, no
income tax states like Florida and Tennessee are Alaska's only
competitor. They have no income tax and already do what SB 159
proposes. They index the duration of unemployment benefits to
the unemployment rate.
2:04:45 PM
MR. CENTORINO recapped the reforms in SB 159. It sets the base
of unemployment benefits to 14 weeks when the state's
unemployment rate is lower than 5 percent; it adds a week of
benefits for every .5 percent increase in the unemployment rate;
and the maximum duration of benefits is 26 weeks when the
unemployment rate is 10.5 percent or higher. Benefits rise and
fall with the unemployment rate.
MR. CENTORINO discussed the effects SB 159 may have. First, he
said indexing has been shown to get people back to work as much
as twice as fast as systems that do not index. Less time
colleting benefits is better both for business and workers. The
longer an individual is unemployed, the more likely it is they
will fall into long-term dependency and the harder it is to find
work. Second, based on the experience in other states, SB 159
will strengthen the state's UI trust fund. Over the last two
years the fund has fallen 20 percent from more than $500 million
to less than $400 million. Indexing will help with that. He
reported that states that index are 84 percent more solvent than
states like Alaska that do not. Based on the solvency of their
trust funds they have also weathered the pandemic much better.
Finally, SB 159 will help lower taxes on businesses and workers.
The Tax Foundation ranked Alaska 43rd on unemployment insurance
taxes. As a percentage of total wages, the UI tax rate in Alaska
is 0.86 percent. Only six states have unemployment tax rates
that are higher. The rate in Florida is 0.10 percent and the
rate in Tennessee is 0.14. He said Idaho also indexes benefits
and its rate is about half the Alaska rate.
MR. CENTORINO encouraged the committee to support SB 159,
thereby making Alaska more pro-business and pro-worker.
2:09:42 PM
CHAIR COSTELLO asked whether the UI trust funds in states that
implemented indexing prior to the pandemic fared better than
states that did not index.
MR. CENTORINO recounted that Florida began indexing in 2011 out
of desperation because its trust fund was deep in the red. Now
it is one of the most solvent UI trust funds in the nation and
it weathered the pandemic well. The UI trust funds in North
Carolina and Tennessee also fared well during the pandemic. He
said states that index are able to weather unexpected
emergencies better because flexibility is built into indexing.
2:11:48 PM
CHAIR COSTELLO asked him to talk about the differences between
the existing unemployment system versus the system the bill
contemplates and why he would argue that indexing is a smarter
approach to address unemployment benefits.
MR. CENTORINO answered that the existing system looks only at
the past whereas SB 159 proposes a system that looks at both the
present and future job prospects of the benefit claimant.
Alaska's current system, while somewhat unique, is more similar
to the one-size-fits-all approach that most states use. SB 159
proposes a system that is responsive and reflective of Alaska's
dynamic economy.
2:14:03 PM
CHAIR COSTELLO asked what unemployment insurance is and is not
supposed to be.
MR. CENTORINO replied that it is meant to be a temporary
supplement for a worker who is moving from one job to the next.
It is not designed or meant to be a permanent or complete
replacement of their wages.
2:15:33 PM
SENATOR MICCICHE directed attention to the handout in the bill
packet from the Foundation for Government Accountability
(FGA)that shows [how each state's UI trust fund balance changed
from January 2020 to November 2021.] He noted that most of the
states that are underwater are fairly blue and said he presumes
they have more lenient unemployment insurance policies. However,
Texas is an outlier; it is a red state and the balance of its UI
trust fund declined 392 percent over that timeframe. He asked if
it was policy, Covid policy, or unemployment insurance policy
that accounts for that precipitous decline during the pandemic.
MR. CENTORINO answered that FGA is working to identify the
reason the Texas UI trust fund is in this situation. He guessed
(and asked to not be held to it) that the tax rates did not
reflect the reality of the benefit duration. Texas does not
index and has a similar benefit duration calculation as Alaska,
and its unemployment taxes are much lower. By comparison,
Florida lowered its unemployment tax rates after it started
indexing.
SENATOR STEVENS asked what it means to index and how SB 159
changes the approach to indexing.
MR. CENTORINO explained that indexing connects the duration of
benefits to the unemployment rate in the state instead of basing
duration of benefits on past work.
2:19:45 PM
CHAIR COSTELLO asked Ms. Wilterdink to proceed.
2:19:57 PM
MELODIE WILTERDINK presented the PowerPoint titled, Senate Bill
159 "An Act relating to unemployment benefits." She directed
attention to the chart on slide 2 that shows two workers who
each earned $48,000 in the past year. The division looks at
wages earned in the first four of the last five quarters to
calculate the amount and duration of the benefit. Worker 1's
income was consistently spread through all four quarters whereas
worker 2's income was seasonal. Under the current UI system,
worker 1 would receive 26 weeks of benefits and worker 2 would
receive just 20 weeks. She asked, "Why do we have a system that
treats these two people differently."
MS. WILTERDINK stated that SB 159 takes the job market into
account and gives individuals who are unemployed at the same
time the same duration of benefits. She directed attention to
the table on pages 2 and 3 of the bill that shows the new scale
that SB 159 proposes. For example, if the average unemployment
rate is below five percent, the maximum duration of benefits is
14 weeks. For each 0.5 percent increase in the unemployment
rate, another week of benefits is added. The cap is 26 weeks
when the unemployment rate is above 10.50 percent.
2:22:10 PM
MS. WILTERDINK directed attention to the graph on the right side
of slide 5 and pointed out that with the exception of Covid,
there has been a consistent decrease in Alaska's seasonally
adjusted unemployment rates over the last ten years. She noted
that in in early 2012 the rate was over seven percent but by
2019 it had dropped below six percent. She directed attention to
the table on the left side of slide 5 that shows the quarterly
average unemployment rate for UI applicants throughout the same
timeframe. She explained that the last entry, which is 5.9
percent, reflects the seasonally adjusted average unemployment
rate for October through December of 2021. If SB 159 were in
place, the department would average the 5.9 percent [and the
last three quarterly rates on the line above] to arrive at 16
weeks of benefits.
MS. WILTERDINK restated that SB 159 does not change the amount
of the weekly benefit. She pointed to the weekly benefit
calculation worksheet depicted on slide 6 and explained that the
first two sections of the worksheet would remain unchanged. It
is the third section that would no longer be used; it determines
duration of benefits by calculating earnings ratio. Section 5 of
the bill repeals AS 23.20.350(g)(2), which is the reference to
the earnings ratio calculation.
2:24:26 PM
CHAIR COSTELLO noted that Ms. Westcott indicated that a person
who willingly leaves their job is not eligible for unemployment
benefits. However, businesses and individuals from nearly every
sector of the economy are saying they are having trouble finding
people to take available jobs. She noted the current low
unemployment rate and asked if the unemployment rate calculation
accounts for those individuals who are unemployed by choice.
MS. WILTERDINK offered her understanding that individuals who
are unemployed by choice are not counted; the unemployment rate
includes those individuals who are actively seeking employment
in the job market.
CHAIR COSTELLO said that was her assumption but she wanted it
clarified.
2:26:27 PM
SENATOR GRAY-JACKSON summarized her understanding that the
duration of benefits is based on inflation and it applies to all
applicants.
MS. WILTERDINK confirmed that the duration of benefits would be
based on the unemployment rate for the previously ended quarter.
Everyone who applies in that timeframe/job market receives the
same weeks of benefit.
SENATOR GRAY-JACKSON restated the point saying, "The number of
weeks based on inflation is applicable to anyone who applies for
unemployment benefits."
MS. WILTERDINK restated, "It is the unemployment rate of the
previous quarter that is going to apply to everyone who is
applying at that time."
SENATOR STEVENS asked how indexing and seasonal workers are
connected.
CHAIR COSTELLO answered that whether a person works seasonally
or year-round is a separate issue than indexing. Under the
current system a seasonal worker receives fewer weeks of
benefits than a year-round worker who earns the same annual
wage. She said it is not fair to penalize workers who earn their
income in a shorter period of time. SB 159 treats both types of
workers the same.
CHAIR COSTELLO continued to explain that SB 159 also eliminates
the current system that bases duration of benefits on a worker's
previous earnings. The bill instead adopts indexing, which ties
the number of weeks a person may receive unemployment benefits
to the unemployment rate. She said she believes indexing makes
sense, but she would like Shawnda O'Brien to talk about what
happens to an individual who has received unemployment benefits
for 26 weeks and is still unable to find a job.
2:31:31 PM fix
SHAWNDA O'BRIEN, Director, Division of Public Assistance,
Juneau, Alaska, explained that the division has two programs
that are designed to help both employed and unemployed
individuals. These are the Supplemental Nutrition Assistance
Program (SNAP) and the Temporary Assistance for Needy Families
(TANF) program. Both programs require individuals to either be
seeking employment or be working a certain number of hours a
week.
2:32:31 PM
SENATOR MICCICHE said he supports indexing but he wonders what
everyone is missing when they look at the question of why
businesses are having trouble finding workers to fill even high
paying jobs such as those on the Slope that can pay $100,000 a
year.
CHAIR COSTELLO asked Ms. Westcott to respond.
MS. WESTCOTT deferred to Mr. Weller who was part of the research
and analysis team that was looking into the issue of the great
resignation and the workers shortages.
2:34:44 PM
MR. WELLER said it is a complicated question and the answer
involves a variety of factors including: skill mismatches,
geographic mismatches, and individual household circumstances.
He added that at any moment in time there is always a certain
amount of frictional and cyclical unemployment but it is
heightened now, primarily because of the pandemic.
SENATOR MICCICHE restated that he believes there is something
else contributing to the current situation where relatively high
paying jobs are going unfilled. Turning to the question of
indexing, he asked about the idea of basing the index on the
different geographic and economic areas of the state.
MR. WELLER said it is a good question because the local
economies throughout the state vary significantly. Some areas,
such as Skagway, are more subject to seasonal swings than more
urban and developed areas like Anchorage and MatSu where the
unemployment rate tends to be much lower and more stable. He
suggested that if individuals are considered based on geographic
location, the local labor market attached to the area would be
important.
2:38:58 PM
CHAIR COSTELLO highlighted that the balance of the UI trust fund
decreased during Covid, and stated her belief that indexing
would cushion such declines and help unemployed workers in the
future. She asked how long it would take before the trust fund
became an unfunded liability if the state were to experience
pandemics in the future similar to the last two years.
MR. WELLER replied he had not done a stress test with that
distinction, but the system is structured to account for costs
borne by the system and it is recession-ready due to the reserve
ratio. Benefit costs were dropping in the weeks leading up to
Covid, largely because of the benefit schedule in statute, which
is not indexed. He said what we have seen over time in real
terms is a reduction in those benefit costs. That has driven
costs down and the expectation is that this will not change in
the future unless the statute changes.
CHAIR COSTELLO pointed out that the bill will increase benefits
for seasonal workers. She said that will be an added cost to the
trust, but it is balanced by the sliding scale based on the
unemployment rate.
SENATOR STEVENS mentioned resignations in school districts
across the state due to health concerns related to Covid. He
asked Mr. Weller to comment on what the future holds for the
state.
MR. WELLER said the research and analysis team has been focused
on that question and he did not believe anyone had quite put a
finger on the reason or solution. He posited that it would take
years to play out and probably would not be uniform across
regions, industries, or occupations.
SENATOR STEVENS said he would appreciate the legislature being
kept up to date on what the research and analysis team finds.
CHAIR COSTELLO held SB 159 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 159 version I.pdf |
SL&C 2/4/2022 1:30:00 PM |
SB 159 |
| SB 159 Explanation of Changes, version B to I.pdf |
SL&C 2/4/2022 1:30:00 PM |
SB 159 |
| SB 159 Sponsor Statement.pdf |
SL&C 2/4/2022 1:30:00 PM |
SB 159 |
| SB 159 Sectional Analysis version I.pdf |
SL&C 2/4/2022 1:30:00 PM |
SB 159 |
| SB 159 Fiscal Note 236 - DOH.pdf |
SL&C 2/4/2022 1:30:00 PM |
SB 159 |
| SB 159 Fiscal Note 2276 - DOLWD.pdf |
SL&C 2/4/2022 1:30:00 PM |
SB 159 |
| SB 159 Powerpoint Presentation 2.4.22.pdf |
SL&C 2/4/2022 1:30:00 PM |
SB 159 |
| SB 159 Supporting Document - Calculating UI Benefits.pdf |
SL&C 2/4/2022 1:30:00 PM |
SB 159 |
| SB 159 Supporting Document - FGA, Indexing Unemployment.pdf |
SL&C 2/4/2022 1:30:00 PM |
SB 159 |