03/06/2024 09:00 AM Senate FINANCE

SENATE BILL NO. 183                                                                                                           
                                                                                                                                
     "An Act relating to  the workers' compensation benefits                                                                    
     guaranty fund; and providing for an effective date."                                                                       
                                                                                                                                
9:49:40 AM                                                                                                                    
                                                                                                                                
SENATOR    JESSE   BJORKMAN,    SPONSOR,   introduced    the                                                                    
legislation.  He spoke  to the  Sponsor  Statement (copy  on                                                                    
file):                                                                                                                          
                                                                                                                                
     Senate  Bill  183, "An  Act  relating  to the  workers'                                                                    
     compensation benefits guaranty  fund; and providing for                                                                    
     an effective date," would  better ensure timely payment                                                                    
     of workers' compensation claims  benefits by making the                                                                    
     Workers'  Compensation Benefits  Guarantee Fund  (Fund)                                                                    
     no  longer subject  to the  sweep provision  in Article                                                                    
     IX, Section  17 of  the Alaska Constitution.  In recent                                                                    
     years,  some of  the  injured  employees filing  claims                                                                    
     with the Fund  have been forced to wait as  long as six                                                                    
     months  to receive  benefits  as  the formerly  healthy                                                                    
     fund  has been  made periodically  insolvent by  annual                                                                    
     Constitutional sweeps.                                                                                                     
                                                                                                                                
     Under the  Alaska Workers' Compensation  Act, employers                                                                    
     of one or more employees  are required to have workers'                                                                    
     compensation  insurance to  cover  medical costs,  lost                                                                    
     wages, and  other benefits due to  employees with valid                                                                    
     on-the-job  injuries.  When  employers  choose  not  to                                                                    
     carry  this  insurance and  fail  to  pay for  employee                                                                    
     claims,  it  puts  an injured  employee  in  a  painful                                                                    
     financial position on  top of the impact  of the injury                                                                    
     itself.                                                                                                                    
                                                                                                                                
     In 2005,  the Legislature  created the  Alaska Workers'                                                                    
     Compensation   Benefits  Guaranty   Fund  to   pay  the                                                                    
     benefits  due  employees   under  the  Alaska  Workers'                                                                    
     Compensation Act  when their employer is  uninsured and                                                                    
     fails  to pay  their  claim. The  Fund  is seeded  with                                                                    
     civil  penalties assessed  against uninsured  employers                                                                    
     and  any reimbursements  the State  is able  to recover                                                                    
     from employers for claims paid from the Fund.                                                                              
                                                                                                                                
     The  timing   of  inflowing  revenues   and  outflowing                                                                    
     payments  may not  align,  sometimes  leaving the  Fund                                                                    
     empty  when  benefit   claims  are  submitted.  Through                                                                    
     careful  management,  the  Fund  had been  built  to  a                                                                    
     sufficient balance prior to FY21  such that it was able                                                                    
     to   make  timely   payments   to  injured   employees.                                                                    
     Unfortunately,  this  many-year  effort  was  nullified                                                                    
     when the FY21  sweep took $3.1 million  from the Fund's                                                                    
     balance. Supplemental Budget requests  in FY22 and FY23                                                                    
     have filled the  gap with General Funds, but  this is a                                                                    
     slow-moving  process leading  to  long  wait times  for                                                                    
     some claimants.                                                                                                            
                                                                                                                                
     While  the Constitutional  sweep provision  is intended                                                                    
     to help  maintain Alaska's long term  fiscal stability,                                                                    
     including the Workers'  Compensation Benefits Guarantee                                                                    
     Fund in the  sweep can have significant  impacts to the                                                                    
     intended  beneficiaries  of  the Fund  while  providing                                                                    
     minimal benefit for the State's savings account.                                                                           
                                                                                                                                
9:51:45 AM                                                                                                                    
                                                                                                                                
CHUCK COLLINS, DIRECTOR,  DIVISION OF WORKERS' COMPENSATION,                                                                    
DEPARTMENT  OF LABOR  AND  WORKFORCE DEVELOPMENT,  explained                                                                    
the reason for the bill,  and he highlighted the zero fiscal                                                                    
note, OMB Component 2820.                                                                                                       
                                                                                                                                
9:54:43 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  spoke of the   sweep  issue  and described                                                                    
the process. He  asked how long it had  taken the department                                                                    
to pay the claims form 2022 and 2023.                                                                                           
                                                                                                                                
9:55:38 AM                                                                                                                    
                                                                                                                                
Mr. Collins responded  that the benefits had  been paid, but                                                                    
a  supplemental   was  being   requested  in  2024   due  to                                                                    
substantial injury settlements.                                                                                                 
                                                                                                                                
9:56:55 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman felt  that a cash flow  statements for FY22                                                                    
and FY23 would be helpful to the committee.                                                                                     
                                                                                                                                
9:58:15 AM                                                                                                                    
                                                                                                                                
Mr. Collins agreed to provide that information.                                                                                 
                                                                                                                                
9:58:25 AM                                                                                                                    
                                                                                                                                
Co-Chair  Olson   asked  when   the  information   could  be                                                                    
expected.                                                                                                                       
                                                                                                                                
9:58:27 AM                                                                                                                    
                                                                                                                                
Mr. Collins  replied that it  would probably be a  couple of                                                                    
days.                                                                                                                           
                                                                                                                                
9:58:45 AM                                                                                                                    
                                                                                                                                
Senator Wilson  thought that all the  accounts vulnerable to                                                                    
the sweep  should be  reviewed to  assure that  the programs                                                                    
they funded were safe.                                                                                                          
                                                                                                                                
9:59:27 AM                                                                                                                    
                                                                                                                                
Co-Chair  Olson understood  that Senator  Wilson was  hoping                                                                    
the Legislative Finance Division would research the matter.                                                                     
                                                                                                                                
9:59:32 AM                                                                                                                    
                                                                                                                                
Senator Wilson replied in the affirmative.                                                                                      
                                                                                                                                
9:59:51 AM                                                                                                                    
                                                                                                                                
Co-Chair Olson OPENED and CLOSED public testimony.                                                                              
SB 183 was HEARD and HELD in committee for further                                                                              
consideration.