Legislature(2023 - 2024)ADAMS 519
05/14/2024 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB151 | |
| SB34 | |
| SB183 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 151 | TELECONFERENCED | |
| + | SB 183 | TELECONFERENCED | |
| += | SB 34 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 183
"An Act relating to the workers' compensation benefits
guaranty fund; and providing for an effective date."
9:32:37 AM
Co-Chair Foster welcomed the sponsor to the table.
9:33:10 AM
AT EASE
9:34:19 AM
RECONVENED
Co-Chair Foster asked for an introduction of the bill.
SENATOR JESSE BJORKMAN, SPONSOR, explained that the bill
would protect the workers' compensation benefits guarantee
fund from being swept so that it had the funds needed to
pay out workers who got hurt on the job and their employers
were without workers' compensation insurance. In recent
years, injured workers waited up to six months to receive
benefit payments because the fund had been empty. The
fund's reserves came from civil penalties against employers
who did not carry the statutorily required workers'
compensation insurance and reimbursement from employers for
injured employee benefits when the state was able to
recover them. He elaborated that because the revenue stream
and benefit payouts were irregular, there were times when
benefit claims were made and there was insufficient revenue
in the fund to make payments to workers who got hurt. In
the past, the fund had been carefully managed to build up
reserves that decoupled from revenues and claims, would be
paid in a timely manner regardless of when they were
received. However, since FY 21, the Constitutional Budget
Reserve (CBR) sweep had cleared the unobligated balance
from the fund each year, removing the reserves that had
allowed for timely payments from the fund.
Senator Bjorkman relayed that the bill had been introduced
by the Senate Labor and Commerce Committee at the request
of the Alaska Workers' Compensation Board (AWCB) and would
help to moderate the fluctuations. The bill would move the
fund outside of the general fund so that it was no longer
subject to the CBR sweep and could gradually rebuild its
reserves in order to pay claims as they were received. He
noted that an individual with the Department of Labor and
Workforce Development (DLWD) Division of Workers'
Compensation was available online to provide further
details.
9:36:45 AM
Co-Chair Johnson stated her understanding that the bill
needed to happen because some funds had been swept that
included some workers' money. She asked how the problem had
been corrected.
Senator Bjorkman answered that when there had been a zero
balance in the fund it was his understanding that workers
had to wait or once the problem had been identified, there
had been some direction given for the benefits to be paid
from somewhere; however, no one had been able to tell him
where the money came from as of yet.
LAURA ACHEE, STAFF, SENATOR JESSE BJORKMAN, replied that
the bill would move the Workers' Compensation Benefits
Guarantee Fund out of the general fund (which was
sweepable), and make it a separate fund in the state
treasury. The intent was to remove the fund from the list
of funds that were eligible to be swept.
Co-Chair Johnson stated her understanding that some of the
funds had been swept and consequently it had required some
clean up and for some of the funds to be reinstated.
Co-Chair Foster noted that conference committee had closed
out. He noted that Co-Chair Johnson, Representative Ortiz,
and Representative Coulombe had joined the meeting. He
asked to hear comments and a fiscal note review from DLWD.
CHARLES COLLINS, DIRECTOR, DIVISION OF WORKERS'
COMPENSATION, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT
(via teleconference), responded to Co-Chair Johnson's
question. He relayed that over $4 million had been swept
from the Benefit Guarantee Fund over the past several
years, which had greatly impacted the state's ability to
pay ongoing indemnity and medical benefits to injured
employees and medical providers. The department was asking
the legislature to protect the funds as they were
completely made up of settlements or fines where employers
had been through the hearing process and settled with the
state for failing to cover employees with workers'
compensation insurance. He noted it reflected a minority of
the employers in Alaska; over 99 percent of employers
continued to provide coverage for their employees. However,
those few employers [without coverage for their employees]
sometimes had some egregious injuries and had cost the
employee the ability to take care of themselves. There were
currently several individuals who would likely never be
able to work again. He elaborated that the injury was to
the extent an individual was paralyzed or had lost a
portion of their body and they were no longer able to do
the job and in some cases any job.
Mr. Collins relayed that the department had recommended the
bill because the Alaska Workers' Compensation Board voted
unanimously to send a resolution requesting the protection
of the fund (copy on file). The fund was established in
2005 and it took over a decade to achieve a decent balance,
knowing that occasionally there would be a claim in the
millions of dollars. Unfortunately, after the first sweep
event, the state had been ordered by the supreme court to
pay a claim of about $1.1 million. The combination of the
two things had greatly emptied the fund. Since that time,
the state had struggled every fiscal year to cover all of
the benefits. In recent years, the Office of Management and
Budget (OMB) had directed him to pay the benefits and pay
from the fund into the negative and the benefits would be
covered through reappropriation. He highlighted that DLWD
had requested $530,000 in the FY 24 supplemental budget to
cover benefits. He relayed that the fiscal note [OMB
component number 2820] was zero because there were no
changes to the management of the fund. He explained that
the fund was managed by staff within the Division of
Workers' Compensation. The department's goal with the
legislation was merely to keep the fund from sweep action.
9:43:10 AM
Co-Chair Foster OPENED public testimony.
Co-Chair Foster CLOSED public testimony.
9:43:50 AM
Representative Josephson noted it was an issue his office
had been involved with the previous term. He thought that
when the CBR had been created by the people in 1990, they
would not have approved it if they had known of the
unintended consequence. He stated that sweeping the fund so
that it was unable to meet its intended purpose was
illogical. He noted that superior court Judge [Josie]
Garton wrote an opinion a couple of years ago (he believed
related to power cost equalization) that said calling
something a separate fund met the requirements of the past
supreme court decision Hickel v Cowper. He stated that the
bill before the committee was one of the cures and he
applauded the senator for bringing the bill forward. He
stated that the legislature used to routinely repopulate
funds; however, around 2020 it stopped and had become a new
weapon that had never been used before to deny the
repopulation of funds. He supported the bill.
Representative Hannan observed that when the fund was
established one of the primary funding mechanisms was civil
penalty assessments against uninsured employers. She
referenced a packet of information from DLWD and looked at
page 2 showing revenue including supplemental funds and
investment profits. She asked Mr. Collins how much money
the fund received annually from civil penalty assessments.
She asked if it was around $750,000.
Mr. Collins answered that in a typical year the funds were
about $750,000, but the current year was about $680,000. He
noted the previous year had been a bit better than the
current year. The amount generally fluctuated between
$700,000 and $750,000. He noted the division had one
position tasked with managing the payment agreements going
forward. He relayed that investigators were constantly on
the job. The department tried to remind employers to keep
their insurance up. He stated it would be a great day if
all employees were covered with workers' compensation and
the guarantee fund had no purpose. Unfortunately, that was
not the situation.
Representative Hannan reasoned there must be a lag time
between the department becoming aware an employer was not
paying the insurance and action being taken to create a
payment plan. She asked if the lag time was one year. She
asked if the department was collecting money from a year's
arrears or longer.
9:47:25 AM
Mr. Collins replied that he could not say exactly how many,
but it was not uncommon for the division to have payment
plans set up with employers who did not have the funds to
pay the agreed upon amount. There could be a fine levied of
around $50,000 or more after going through the formula laid
out in statute. He explained that the employer may not be
able to pay that amount. In that case the division did a
payment agreement at his direction, which over the past
four years had been any amount as long as the employer was
always paying. For example, if an employer was sending $100
per month, the division was allowing them to continue the
payment. In most cases there was a set amount that
employers were to pay as expeditiously as possible.
Representative Hannan underscored the importance of why the
fund needed to not be sweepable. She stated that the sweep
mechanism was set up on an annual fiscal year, yet the
purpose of the fund was to collect things that may be
happening over multiple fiscal years and securing funds to
be available to meet the fund's intended purpose. She
stated that if a payment plan was five years in duration,
yet the fund was swept annually, the money never accrued.
She remarked that it was an important piece of legislation
to get across the finish line in the current session.
Senator Bjorkman thanked the committee for questions and
commentary and Mr. Collins for his diligent work in keeping
the effort up.
Representative Stapp MOVED to REPORT SB 183 out of
committee with individual recommendations and the
accompanying fiscal note.
There being NO OBJECTION, it was so ordered.
SB 183 was REPORTED out of committee with eleven "do pass"
recommendations and with one previously published zero
note: FN1 (LFW).
Co-Chair Foster thanked the senator and his staff.
Co-Chair Foster noted that the 10:00 am meeting would be
delayed.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 275 Public Testimony Rec'd by 051424.pdf |
HFIN 5/14/2024 9:00:00 AM |
HB 275 |
| SB151 Public Testimony Rec'd by 051424.pdf |
HFIN 5/14/2024 9:00:00 AM |
SB 151 |