Legislature(1993 - 1994)
04/13/1993 09:30 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 162:
An Act relating to the implementation of the federal
emergency unemployment compensation program; making
changes relating to unemployment compensation under the
extended benefits program and the supplemental state
benefits program; and providing for an effective date.
Co-chair Peace announced that SB 162 was before the
committee. SENATOR TIM KELLY voiced his support of the bill
but asked for clarification in terms of state dollars. Co-
chair Pearce invited Jim Coate, Unemployment Insurance
Program Manager, Division of Employment Security, Department
of Labor, and Judy Knight, Director, Division of Employment
Security, to join the members at the table and speak to the
bill.
JUDY KNIGHT said that SB 162 did three main things. It
would allow the state to continue its participation in the
emergency unemployment compensation program which Congress
has enacted and amended for the fourth time. Prior
legislation allowed the department to participate in that
program and the participation was limited to two years,
ending December 1993. Currently Congress has extended the
program to pay benefits through the middle of January 1994.
Secondly, the other provisions allow the state law to
conform with federal law in the extended benefits program
(changes made last year by Congress). The third item is an
optional trigger allowing the department to pay the extended
benefits program when the employment rate reaches a certain
level. She explained emergency unemployment compensation is
financed 100 percent by federal revenues. It is being paid
because of high unemployment throughout the nation. When an
individual becomes unemployed, they first draw regular
benefits for 16 to 26 weeks, and during a period of high
unemployment, they may be eligible for extended benefits.
Since Congress passed the emergency unemployment
compensation program, we have bypassed the extended benefit
program and used the federal program.
Senator Kelly asked which fund would pay those extended
benefits. Ms. Knight said that in Alaska, like other
states, there is an unemployment insurance trust fund.
Employers and employees are taxed and the money goes into
that fund. Regular unemployment benefits are paid out of
that fund. Emergency unemployment compensation is drawn
from the U.S. Department of Labor fund. Senator Kelly asked
if the state fund had a surplus. Ms. Knight said that there
was not a surplus but a sufficient balance to maintain
solvency. This balance was equal to 3 percent of the
state's total wages. She explained, in case of a severe
recession, employers' taxes would not have to be increased
to maintain solvency of the fund.
JIM COATE said that the formula that determines tax rates
has what is called a solvency adjustment. That solvency
adjustment is both positive and negative. As the balance in
the trust fund gets too large, by formula, a negative tax is
applied to the overall tax rate, reducing it. It is an
automatic and controlled balance.
Senator Kelly asked if SB 162 would pass this session, how
much federal money would be distributed throughout Alaska.
Ms. Knight said that over $100 million had already been paid
out since the state started the emergency unemployment
compensation program. It is expected that an additional $40
million would be paid out between now and January 1994. Ms.
Knight said that the state would save approximately $20
million in the coming year because claims would be paid
under the emergency program and not under the state's
extended program. There are other provisions that the state
must pass to coincide with federal law. If the state does
not pass these statutes to meet federal law, then the
Secretary of Labor, through a hearing process could find the
state out of compliance, and the state would lose
administrative funds. The administrative funds are all the
federal employment and training dollars that come into the
state. Those funds come from the U.S. Department of Labor
for administrative costs for unemployment insurance, the
employment service and training partnership.
In answer to Senator Kelly, Mr. Coate said that the statute
changes in order to come into federal compliance would not
cost any state dollars. However, the six weeks of benefits
that the state would not be able to pay, if SB 162 does not
pass, would be a loss of about $1.5 million to the state.
The danger is that federal law mandates extended benefits be
paid through January 15, 1994, and state law would stop
payments in the first part of December 1993. The compliance
issue with the federal government could cost the state $25-
30 million in administrative funds that are expected to come
into the state to pay for the administrative part of the
three programs.
Ms. Knight said that the Labor and Commerce Committee had
requested an amendment that would repeal the emergency
compensation provisions and that was provided to the
committee as amendment 1.
Senator Kelly MOVED amendment 1. No objections being heard,
amendment 1 was ADOPTED.
Discussion was had by Mr. Knight and Senator Kelly regarding
additional costs to the state regarding the extended
compensation.
Senator Kerttula MOVED for passage of CSSB 162(FIN) as
amended from committee with individual recommendations. No
objections being heard, CSSB 162(FIN) as amended was
REPORTED OUT of committee with a "do pass," and a zero
fiscal note for the Department of Labor. Co-chairs Frank
and Pearce, Senators Kelly, Rieger, and Kelly voted "do
pass." Senators Jacko and Sharp were absent from the meeting
and did not sign.
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