Legislature(1995 - 1996)
04/26/1996 01:50 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
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= bill was previously heard/scheduled
SENATE BILL NO. 229
"An Act relating to employment contributions and to
making the state training and employment program a
permanent state program; and providing for an effective
date."
DWIGHT PERKINS, SPECIAL ASSISTANT, DEPARTMENT OF LABOR
testified in support of SB 229. He explained that the
legislation extends the life of the State Training and
Employment Program (STEP) for an additional two years and
raises the maximum weekly benefit amount for unemployment
insurance (UI) from $212 to $248. The STEP program was
originally enacted as a pilot program to provide training
for Alaska workers. It diverts part of the employee share
of the unemployment insurance tax to a training fund from
which training grants are awarded. Covered employees pay
one-tenth of one percent of their taxable wages into the
training fund. The program will expire on June 30 of this
year without legislative action.
Mr. Perkins observed that the bill as originally submitted
by the Governor would have made STEP permanent in the same
form as the current temporary program, with the exception
that the Alaska Human Resource Investment Council would
serve as the coordinating entity, in place of the defunct
Alaska Job Training Council. The Senate, Community and
Regional Affairs Committee made three changes to the bill.
First, it provided for a sunset date of June 30, 1998, at
which time the efficiency of service delivery and program
goals can again be evaluated. Second, it inserted a
provision requiring the Alaska Human Resource Investment
Council to impose accounting and grant administration
standards on all entities and their grantees participating
in the program. Third, it imposed a 20 percent cap on
administrative overhead.
Mr. Perkins noted that in the Senate Labor and Commerce
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Committee the UI weekly benefit amount provisions in SB 276
were added to the bill, with changes. This was the version
passed and transmitted to the House.
Mr. Perkins emphasized that except for the above-noted
changes, the provisions of the bill follow the original
pilot program closely. He maintained that the STEP Program
is an integral component of Alaska's job training program
and has enabled participants to increase their average
quarterly earnings from nine to 12 percent. Since its
inception, STEP has trained 4,890 Alaska workers at an
average cost of $2,000 per participant. The program is
financed entirely by employee payroll contributions with no
employer contributions or general fund monies.
Mr. Perkins stressed that STEP serves workers who would
often be ineligible for employment training assistance
through other programs. It offers workers the opportunity
to acquire skills by investing in themselves, and helps
those workers who have been displaced from their jobs to
learn more skills. Nearly 60 percent of those entering the
program are receiving unemployment benefits, and over 80
percent of the participants successful complete the training
and increase their employment opportunities.
Mr. Perkins maintained that as federal training money
decreases from year to year, continuing the STEP Program
will help Alaskans receive the training they need to respond
to the changing needs of business and industry.
Mr. Perkins observed that the Governor's original UI benefit
increase proposal was introduced as SB 276. It proposed a
flexible maximum weekly benefit amount, computed from the
wage base, defined by statute as 75 percent of the average
annual wage, in effect for the calendar year. The bill was
combined with SB 229 in the Labor and Commerce Committee,
with the following changes:
1. The benefit cap was set at a maximum of $248
dollars. The flexible schedule was
discarded.
2. The respective employer/employee shares of
the benefit cost rate were changed from 82/18
to 80/20.
3. The resulting employee tax rate was rounded
to the nearest one/hundredth of one percent
(from one/tenth of one percent).
Mr. Perkins observed that these changes will result in
additional costs to the fund over time, but the respective
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employer and employee shares of those costs will change.
Employees will be contributing a full one-fifth of the
benefit cost rate, and the employer share will decrease to
four-fifths. He noted that the schedule of benefits for
unemployment insurance has not been adjusted to increase the
maximum weekly benefit amount since 1990. Alaska currently
ranks 49th in the nation in unemployment insurance wage
replacement, with the average weekly benefit amount only
slightly more than 27 percent of the average weekly wage for
the state. In terms of the maximum weekly benefit amount,
Alaska ranks 35th in the nation, notwithstanding the higher
cost of living. Alaska currently has the lowest regular
maximum benefit amount of all western states except Arizona.
Mr. Perkins stated that this increase will provide a modest
improvement in wage replacement, coupled with an increase in
the employee share of UI costs. He noted that the employee
will share in the increase of costs. The additional cost to
the employer is a savings of $15 dollars per employee per
year. The additional cost to the employee will be $20
dollars more per year or an additional cost per week of .38
cents.
In response to a question by Representative Brown, Mr.
Perkins stated that Alaska's rating will not be changed by
the legislation. Employees will get a modest increase
during times of unemployment.
Representative Mulder maintained that there was no effort to
try to shift state costs. The effort was to increase the
employment benefit.
Representative Brown noted that the employer as a whole is
contributing less and employees are contributing more. She
asserted that the burden is being shifted from the employers
to the workers.
Mr Perkins emphasized that lower scale individuals will pay
less than $20 dollars.
RON TORGENSON, DEPARTMENT OF LABOR explained that the
current unemployment schedule is bottom heavy. He stated
that the benefit is proportional to the burden. He stated
that the change will cause the people making less and not
benefiting from the increase to pay only pennies a year
more. The only people that will be paying $25 dollars a
year are the people at the top end of the scale.
Representative Martin expressed concern with a lack of jobs
for individuals that attend training programs.
MARK MICKELSON, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS
stressed that the identification of appropriate training
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only happens when there is an identifiable career or
employment goal. He stressed that if there is no evidence
of employment money will not be spent on training.
Individual involvement in the program varies. The success
rate of training entities are taken into account. He
estimated a 60 percent employment rate for those that have
successfully completed training.
Representative Brown MOVED to report CSSB 229 (L&C) out of
Committee with individual recommendations and with the
accompanying fiscal notes.
CSSB 229 (L&C) was reported out of Committee with a "do
pass" recommendation and with four fiscal impact notes; two
by the Department of Community and Regional Affairs, dated
3/20/96; two by the Department of Labor, dated 3/22/96; and
with a zero fiscal note by the Office of the Governor, dated
3/20/96.
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