Legislature(2013 - 2014)HOUSE FINANCE 519
04/07/2013 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB21 | |
| HB193 | |
| HB76 | |
| HB193 | |
| HB129 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 21 | TELECONFERENCED | |
| += | HB 129 | TELECONFERENCED | |
| + | HB 76 | TELECONFERENCED | |
| + | HB 193 | TELECONFERENCED | |
| += | SB 18 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 76
"An Act relating to electronic filing of certain
information with the Department of Labor and Workforce
Development; relating to surcharges, rate increase
reduction, prohibition on the relief of certain
charges, the unemployment trust fund account, and the
offset of certain unemployment compensation debt under
the Alaska Employment Security Act; relating to the
definition of 'covered unemployment compensation debt'
in the Alaska Employment Security Act; and providing
for an effective date."
DIANE BLUMER, COMMISSIONER, DEPARTMENT OF LABOR AND
WORKFORCE DEVELOPMENT (DLWD), introduced department staff.
She explained that the bill did four things: (1) allowed
for electronic filing of reports and documents, (2)
improved the ability to recoup fraudulent unemployment
insurance (UI) payments, (3) adopted minor changes bringing
the department into compliance with federal law governing
the UI program, and (4) changed how UI tax rates were set
in order to keep more money in the hands of Alaskan
employers and employees. The bill would keep more money
circulating in the state's economy while protecting the
integrity of the trust fund.
PAUL DICK, DIRECTOR, DIVISION OF EMPLOYMENT SECURITY,
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, provided a
sectional analysis of the bill.
Section 1 adds a new section, AS 23.05.055,
authorizing the commissioner to allow the use of
electronic filing methods in place of paper filing.
Section 2 adds a new section, AS 23.20.021,
authorizing the legislature to appropriate money into
the unemployment trust fund account.
Section 3 adds a new section, AS 23.20.279, to bring
the state into conformity with federal law, Public Law
112-40, by prohibiting the relief of charges to
employers when an erroneous payment of unemployment
insurance benefits is made due to an established
pattern of the employer, or an agent of the employer,
for failing to respond timely or adequately to a
documented request for information relating to a claim
for unemployment compensation. This section defines
"erroneous payment" as a payment made that would not
have otherwise been paid, but was due to the failure
of the employer to respond timely or adequately. This
section also defines "pattern of failing" as two or
more times or 2% or more of all requests, whichever is
greater, during the prior year.
Section 4 amends AS 23.20.290(c) by adding the word
"surcharge" following the words "fund solvency
adjustment".
Section 5 repeals and reenacts AS 23.20.290(f),
replacing a table method for determining fund solvency
adjustment surcharges with a more precise calculation
method. It also eliminates the 0.3 limitation on fund
solvency adjustment surcharge decreases in a single
year.
Section 6 adds a new section, AS 23.20.291,
authorizing the commissioner to suspend, in whole or
in part, increases in unemployment tax rates when the
"average high cost multiple," a measure of solvency
calculated by the U.S. Department of Labor, Employment
and Training Administration, is 0.8 or greater and
after consultation with the department's actuary.
Section 7 amends AS 23.20.390(f) to bring the state
into conformity with federal law, Public Law 112-40,
by removing the department's authority to waive the
collection of a penalty established due to
misrepresentation and requires that a minimum of 30%
of the unemployment insurance penalties collected due
to misrepresentation be deposited into the state's
unemployment trust fund account.
Section 8 adds new section, AS 23.20.486 to authorize
the department to offset unemployment compensation
debt against a claimant's federal income tax refund.
This section would allow the state to participate in
the federal treasury offset program.
Mr. Dick elaborated on Section 7 and relayed that currently
the department was required to put 100 percent of the
penalty collections into the unemployment trust fund
account (the figure would be changed to 30 percent under
the legislation). He pointed to Section 8 and shared that
there were 19 other states currently participating in the
federal treasury offset program; the program would enable
the department to collect $500,000 per year and to allocate
more money to the trust fund.
5:09:14 PM
Mr. Dick continued with the sectional analysis:
Section 9 amends AS 23.20.520, by adding a new
paragraph to define "covered unemployment compensation
debt" in accordance with the federal statutory
definition.
Section 10 effective July 1, 2018 repeals AS
23.20.291, added by section 6 of this bill.
Section 11 amends state uncodified law by specifying
that AS 23.20.279, added by section 3 of this bill,
applies to overpaid benefits established after October
21, 2013.
Section 12 specifies that the department will adopt
necessary regulations to implement changes.
Regulations will not be effective prior to July 1,
2013.
Section 13 establishes that section 12 takes effect
immediately.
Section 14 establishes the effective date for the
remaining sections of this Act as July 1, 2013.
5:10:08 PM
CATHIE ROEMMICH, CEO, JUNEAU CHAMBER OF COMMERCE, spoke in
support of the legislation. She read from a statement:
Thank you for all of your efforts to keep our state
strong by working for small business growth. It's not
often these days we find ways to lower the cost on
anything, so we applaud the governor for bringing
forward the solvency of Alaska's Unemployment Trust
Fund Account. The Juneau Chamber of Commerce
represents nearly 400 business members and their
employees. It is our job to promote and support a
positive business climate, not only in Juneau, but
throughout the state. Our members support legislation
that updates and clarifies laws as they relate to
doing business in an effort to improve Alaska's
business environment. Therefore, we would like to add
our support to House Bill 76. We are pleased that this
legislation will ensure that business owners as well
as Alaskan workers are not paying more to state
government in unemployment insurance taxes than
necessary. The Juneau Chamber also understands the
importance of compliance with the federal unemployment
insurance laws. Maintaining a significant federal
Unemployment Tax Act credit that our employers
currently receive is another critical piece of
responsible taxation. The federal compliance
components of House Bill 76 ensure that Alaskan
businesses will not be sending any more money to
Washington D.C. than necessary for the unemployment
insurance program. We are also supportive of the
greater efficiencies that the Department of Labor will
be able to provide by allowing electronic filing of
our unemployment claims. Thank you all for the work
you do on behalf of Alaskans.
5:11:56 PM
BARBARA HUFF TUCKNESS, DIRECTOR, LEGISLATIVE and
GOVERNMENTAL AFFIARS, TEAMSTERS LOCAL 959, discussed the
organization's membership. She referred to an opposition
letter from the Fairbanks Chamber of Commerce (copy on
file). She relayed that the organization had paid
approximately $36,000 in unemployment taxes in 2012;
employees had paid slightly over $8,000. She shared that
Alaska was one of three states where employee and employer
contributions went into the fund. She communicated that the
organization had concern related to Section 6 of the House
Labor and Commerce Committee CS. She detailed that the
concern with Section 6 related to the amount of money
employers and employees would pay into the fund. She had
sent DLWD questions related to how the rate was calculated
and how the change would impact employers and employees.
She read a specific question that had been raised followed
by a response from DLWD:
Q: If the rate increases are suspended as referenced
in Section 5 [Section 6 in the current CS] of the bill
and the average high cost multiple falls below the
trigger, won't employers and employees subsequently be
required to pay more than what they would have had the
earlier rate increase not been suspended.
A: If rate increases are suspended employers and
employees would be required to pay slightly more in
subsequent years than they would have if the increases
had not been suspended in the earlier years. Over the
long-term, the amount paid by employers and employees
would be about the same or slightly less if increases
were never suspended. Any suspension would have the
effect of deferring suspended taxes that would be
absorbed over a multiple of years following.
Ms. Huff Tuckness was not concerned with any other sections
of the bill.
5:16:21 PM
Ms. Huff Tuckness stressed that the current formula had
worked well since the 1980s. The concern related to a
potential impact on a fund that was currently running well.
She encouraged the committee's consideration related to
Section 6.
Representative Holmes asked what the organization's
preference was related to Section 6. Ms. Huff Tuckness
replied that the organization would prefer that the section
was removed from the legislation. She noted that the
removal of the section would mean there would not be any
suspensions of what employers or employees would pay.
Representative Gara asked whether Section 6 could be
rewritten so that the regular rate would go back into
effect when the fund's surplus dissipated. Ms. Huff
Tuckness felt that she was not the appropriate person to
respond to the question. She referred to a question by the
organization about how a surplus in the fund would be
defined. She believed the questions fell under the purview
of the department or the creator of the original formula.
She added that the UI fund paid for some great educational
programs throughout the state and made contributions to
unemployed individuals.
Representative Gara wanted to ensure the fund was able to
continue paying for items it funded. He asked if Ms. Huff-
Tuckness disagreed that the fund currently had a surplus.
5:20:02 PM
Ms. Huff Tuckness did not agree that there was a surplus.
She elaborated that fund contributions were based on a
formula that had been established in the 1980s that had
successfully ensured adequate contributions when economic
times in the state were bad or good. She discussed rates
over the past 10 or 20 years and referred to a chart
showing slight increases and decreases over the years. She
noted that the current formula ran smoothly.
Vice-Chair Neuman asked whether the issue had been
addressed in the House Labor and Commerce Committee and if
so, why the committee had decided to keep the section. Ms.
Huff Tuckness replied that she had brought the concern to
the prior committee. She believed a sunset provision
amendment passed by the prior committee was a way to
address any negative issues should they occur. She surmised
that if the bill passed with the provision intact and none
of the concerns came to fruition there may be an effort to
either extend or remove the repeal.
Representative Costello requested that the bill be held
after public testimony for further review. She offered her
time to help resolve the issue.
5:23:26 PM
PAUL GROSSI, ALASKA PIPE TRADES AND IRON WORKERS OF ALASKA,
JUNEAU, followed up on testimony provided by Ms. Huff
Tuckness related to Section 6 and stated that there may be
a surplus in the fund currently, but there was no way for
him to know. He surmised that the Legislative Finance
Division director was probably the expert. He stated that
there may be a way of tweaking the formula if the fund was
over funded in order to give employers a break; the fund
had been in effect for over 30 years and had worked close
to perfectly. He cautioned to be careful with changing the
formula because if there was a relief of an increase and a
downturn in the economy caused the fund to become insolvent
the employers would be on the hook. He explained that the
federal government would have to pay the benefits and would
require reimbursement with interest and the fund would need
to be made solvent again. He did not believe the sky was
falling, but the current system had worked for a long-time.
He suggested that the committee look further into the
issue.
5:26:42 PM
Representative Wilson observed that Section 6 appeared to
have checks and balances. She furthered that if the formula
were to be changed it would be looked at again in the first
year and subsequent years to ensure it was running
smoothly.
Mr. Grossi agreed that there were checks included the
Section. He communicated that when the formula had gone
into effect in 1979 or 1980 there had been significantly
fewer employers and employees. He stated that it may be
possible to tweak the formula to give employers a break for
a long period of time. He noted that the financial analysts
would be better equipped to provide that information.
5:28:45 PM
DENNIS DEWITT, NATIONAL FEDERATION OF INDEPENDENT
BUSINESSES, JUNEAU, shared information about the
organization. He spoke in strong support of the legislation
including Section 6. He shared that the organization's
national consultant had looked at the section and was
comfortable that the slight formula tweak would not cause
any trouble for employers. He detailed if no employer were
able to pay any UI taxes the fund would still have the
ability to pay out funds equal to those paid in the last
year for another 1.75 years. The organization believed the
amount was sufficient for a trust fund. Additionally, the
organization believed that continuing to increase the trust
fund assessment was taking money out of employers' and
employees' pockets and putting it into a state savings
account at an inappropriate and unneeded level.
Representative Gara pointed to Section 6, page 4, line 26.
He believed the bill's provision requiring a reduction to
last for a one-year period in the event of a surplus was
inflexible. He wondered whether the section could be
modified to allow for a lower rate on a month to month
basis.
Mr. Dewitt replied that continued changes of tax rates
created problems for employers related to payroll. Changing
the rate on a monthly basis would require computer systems
to be reprogrammed on a monthly basis, which would become
expensive. He stated that Public Employees' Retirement
System (PERS) was concerned about when retirees were
elderly; however, the UI fund was concerned about setting
rates for the present and three years out. The organization
believed an annual setting was sufficient and the
likelihood of the fund being expended during that time
period was very unlikely.
Representative Gara assumed that the rate would not need to
be looked at every month. He believed that if a surplus was
identified the rate could be reduced and once there was no
longer a surplus it could be dropped the following month.
5:33:30 PM
DON ETHERIDGE, ALASKA AFL-CIO, JUNEAU, supported the
majority of the legislation but had concerns about Section
6. He shared that declining revenues was the primary reason
for concern.
5:34:29 PM
ANDY ROGERS, SELF, ANCHORAGE (via teleconference), spoke in
support of the legislation. He spoke from the perspective
of an employer and did not see the bill as a game changer.
He was encouraged by the state's work to conduct business
efficiently. He looked at Section 6 and opined that the
ability for the commissioner to give employers a break when
the fund did well was a good way for the state to help
employers. He did not believe a break on a potential
increase would save the solvency of the fund in a major
economic downturn.
Co-Chair Stoltze asked if Mr. Rogers was a small business
owner. Mr. Rogers replied in the affirmative. He and his
wife owned a physical therapy clinic with multiple
locations.
5:36:54 PM
RACHEL PETRO, PRESIDENT and CEO, ALASKA STATE CHAMBER OF
COMMERCE (via teleconference), spoke in support of the
legislation. She stated that most of the provisions were
straight forward. She asked for the system to remain
compliant, efficient, and fair. She relayed that the
chamber did support Section 6 of the legislation.
Co-Chair Stoltze CLOSED the public testimony.
HB 76 was HEARD and HELD in committee for further
consideration.
AT EASE
5:39:06 PM
RECONVENED
5:42:48 PM