Legislature(2017 - 2018)HOUSE FINANCE 519

05/09/2017 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Bill Hearing Canceled>
Moved HB 150 Out of Committee
Moved CSHB 124(FIN) Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 74(FIN) Out of Committee
HOUSE BILL NO. 142                                                                                                            
     "An  Act relating  to unemployment  insurance benefits;                                                                    
     increasing  the maximum  weekly unemployment  insurance                                                                    
    benefit rate; and providing for an effective date."                                                                         
2:40:57 PM                                                                                                                    
REPRESENTATIVE  CHRIS   TUCK,  SPONSOR,  read   the  sponsor                                                                    
     The   Alaska   Department   of   Labor's   Unemployment                                                                    
     Insurance (UI)  program provides  unemployment benefits                                                                    
     to eligible  workers who  become unemployed  through no                                                                    
     fault of  their own,  working less than  full-time, and                                                                    
     meet certain  other eligibility requirements.  With the                                                                    
     seasonal nature  of much of  the state's  workforce and                                                                    
     Alaska's vast  remoteness, UI  benefits serve  not only                                                                    
     to bridge  the economic gap for  the individual worker,                                                                    
     but   also  as   a  stabilizing   influence  on   local                                                                    
     The  current Maximum  Weekly Benefit  Amount (MWBA)  of                                                                    
     $370 only  replaces 36% of  the state's  average weekly                                                                    
     wage of $1,020. An MWBA  of $510 would provide 50% wage                                                                    
     replacement of  the average  weekly wage,  a nationally                                                                    
     recognized norm.                                                                                                           
     To compare  to other western  states, the MWBA  rate in                                                                    
     Washington is $681, Oregon is $590, and                                                                                    
     California is $450. In addition,  Alaska is one of only                                                                    
     three states  where the cost  of providing  UI benefits                                                                    
     is shared by employers and employees.                                                                                      
     House  Bill  142  would  increase  the  maximum  weekly                                                                    
     benefit amount under  the UI Program in  two steps from                                                                    
     the current $370 to $458 in 2018 and to $510 in 2019.                                                                      
     Among 50  states, the District of  Columbia, and Puerto                                                                    
     Rico, Alaska is:                                                                                                           
        · 39th in Maximum Weekly Benefit Amount                                                                                 
        · 44th in Average Weekly Benefit Amount ($252)                                                                          
        · 52nd in Wage Replacement Ratio (.288)                                                                                 
        · 9th in Recipiency Rate (unemployed workers                                                                            
          receiving benefits - .37)                                                                                             
     As a  claimant filing for UI  benefits, individuals are                                                                    
     responsible  for  actively  seeking  suitable  fulltime                                                                    
     employment   and   reporting   activity   for   seeking                                                                    
     employment each week to remain eligible.                                                                                   
     The  federal poverty  level for  a family  of three  in                                                                    
     Alaska for 2016 is $25,200, or $2100 a month.                                                                              
     An   unemployed  single   parent  with   two  dependent                                                                    
     children receiving the MWBA of  $370 plus the dependent                                                                    
     child  allowance of  $24 per  child under  18 (up  to a                                                                    
     maximum  of  three)  receives approximately  $1800  per                                                                    
     month in UI benefits.                                                                                                      
     By passing House Bill 142,  Alaska will be more in-line                                                                    
     with  the  average  weekly  benefits  and  provide  the                                                                    
     necessary  financial support  families need  to survive                                                                    
     while seeking employment.                                                                                                  
Representative Tuck relayed  that there were representatives                                                                    
from the  Department of Labor and  Workforce Development who                                                                    
worked   with  the   Unemployment  Insurance   (UI)  Program                                                                    
available for questions.                                                                                                        
Co-Chair Foster reviewed the list of available testifiers.                                                                      
Representative  Wilson commented  that  it  looked like  the                                                                    
amount a person made was going  up rather than having a cap.                                                                    
She wondered  if the legislation would  require employers or                                                                    
employees to pay a higher percentage into unemployment.                                                                         
2:45:30 PM                                                                                                                    
LENNON WELLER, ECONOMIST,  RESEARCH AND ANALYSIS, DEPARTMENT                                                                    
OF LABOR  AND WORKFORCE  DEVELOPMENT, responded that  as the                                                                    
state increased  benefit costs  beyond the  current schedule                                                                    
there would be a bit of  an increase in costs going out into                                                                    
the  future, as  tax rates  would  need to  respond to  some                                                                    
larger benefit costs.                                                                                                           
Representative  Wilson  wanted  to  know if  it  would  cost                                                                    
employers or employees  more of a percentage  than what they                                                                    
currently contributed  to the program. Mr.  Weller responded                                                                    
that there  were essentially two  steps to the  financing of                                                                    
the  UI system.  The first  main part  was a  cost recapture                                                                    
portion  which divvied  out benefit  costs  recaptured as  a                                                                    
share. It was a 73/27 split  in statute. He relayed that the                                                                    
share would  remain the same.  However, as  costs increased,                                                                    
rates would reflect a larger  benefit cost. As more benefits                                                                    
were  paid   out  and  the   trust  fund  moved,   it  would                                                                    
potentially increase tax rates.                                                                                                 
Representative Wilson wondered if  the department would have                                                                    
to come back to the legislature  for a statute change if the                                                                    
rates  increased.  Mr.  Weller relayed  that  the  financing                                                                    
system  was set  in  statute. The  department  would not  be                                                                    
required   to  come   back  to   make   a  statute   change.                                                                    
Essentially,  it  was   an  automatically  adjusting  system                                                                    
trying to both maintain rates  that were reflective of costs                                                                    
and a  target for  the reserve  ratio in  the fund.  All the                                                                    
financing was directed through current statute.                                                                                 
Representative  Wilson wanted  to see  a chart  showing what                                                                    
the change would  look like. She agreed that  the rates were                                                                    
low,  especially with  a cap  in place.  She also  wanted to                                                                    
know about the  training funds such as  the Alaska Technical                                                                    
Vocational  Education  Program  (TVEP)  funds  tied  to  the                                                                    
state's  unemployment.  She  wondered,  that  as  the  state                                                                    
dwindled some of the funds  by increasing funding in another                                                                    
place,  how someone  would have  access to  those funds  for                                                                    
additional  training. She  was concerned  because there  had                                                                    
been an issue  in the prior year  with unemployment funding.                                                                    
Representative Tuck wondered if  her question was about what                                                                    
would happen with the TVEP  funds if the rates increased. He                                                                    
thought the TVEP funding rate was 1 percent.                                                                                    
Representative  Wilson commented  that as  more people  were                                                                    
unemployed  there  would  be less  money  available  in  the                                                                    
unemployment fund, the fund that  funded TVEP. She indicated                                                                    
there  was also  other training  programs, paid  through the                                                                    
unemployment fund,  available for  people needing to  find a                                                                    
new vocation.  She wanted to  ensure there was  enough money                                                                    
for the programs already using the fund.                                                                                        
Mr. Weller conveyed  that an increase in  the maximum weekly                                                                    
benefit amount  would not impact  either the  State Training                                                                    
and  Employment  Program  (STEP)  or  TVEP  funding  to  any                                                                    
extent; they were dedicated taxes  paid for out of a portion                                                                    
of employees' tax rates. It  never actually went into the UI                                                                    
trust  fund. It  was  diverted, pre-deposit,  and the  rates                                                                    
were  set  in  statute.  It  was  sixteen  hundredths  of  a                                                                    
percentage  point for  TVEP and  one tenth  of a  percentage                                                                    
point for  the STEP training  programs of which  were offset                                                                    
against  an  employee's  portion  of their  initial  UI  tax                                                                    
Representative  Tuck responded  that unemployment  would not                                                                    
go up  because of  the bill. Larger  benefits would  help to                                                                    
maintain families. If the  representative was concerned that                                                                    
more Alaskans would remain in  Alaska and would have to take                                                                    
advantage of the programs, it was a possibility.                                                                                
2:51:06 PM                                                                                                                    
Representative  Wilson wanted  Alaskans to  stay in  Alaska.                                                                    
Her concern was that the  excess money that was not utilized                                                                    
currently  would be  utilized  for other  things aside  from                                                                    
benefits. She  wanted to  ensure that  the fund  was healthy                                                                    
enough and  those who needed  to be retrained could  get the                                                                    
training. She  commented that UI  was used for  other things                                                                    
besides benefits. She  wondered how the state  would do more                                                                    
with less. She thought the  cost would fall on the shoulders                                                                    
of  the  employer  and  the  employee.  Representative  Tuck                                                                    
answered  that  he  did  not  know  what  kind  of  benefits                                                                    
unemployed Alaskans  received if there was  left over money.                                                                    
He thought most of the programs  were paid off the top, when                                                                    
the  money   went  into  the   fund.  He  deferred   to  the                                                                    
PATSY  WESTCOTT,  ASSISTANT DIRECTOR,  EMPLOYMENT  SECURITY,                                                                    
DEPARTMENT  OF LABOR  AND  WORKFORCE DEVELOPMENT,  responded                                                                    
that  the  funding mechanisms  for  STEP  and TVEP  did  not                                                                    
change with the bill. If  the department had seen variations                                                                    
in the  amount available for  STEP and TVEP, it  was because                                                                    
UI tax rates went up or down.  As UI tax rates went up, more                                                                    
money  was collected  creating a  larger diversion  for STEP                                                                    
and  TVEP. As  tax  rates went  down, there  was  less of  a                                                                    
diversion for STEP and TVEP.                                                                                                    
Representative Wilson asked how the  rates went up and down.                                                                    
Mr. Weller  answered that the  amounts the state  would take                                                                    
in  for  both the  STEP  and  TVEP  programs were  based  on                                                                    
taxable  wages. Specifically,  as  taxable  wages grew,  the                                                                    
nominal amount of dollars being  pulled into either of those                                                                    
funds  would reflect  that  growth. The  rates  for the  two                                                                    
programs  were fixed.  However,  the amount  of money  would                                                                    
change based on the taxable wage base.                                                                                          
Representative Kawasaki  mentioned that in Section  2 of the                                                                    
bill there were  some automatic adjustments in  the bill. He                                                                    
wondered  if  most  states had  automatic  adjustments.  Ms.                                                                    
Westcott  replied  that about  26  states  had an  automatic                                                                    
adjustment  in  their  statutes   to  provide  for  an  auto                                                                    
adjusting maximum weekly benefit amount.                                                                                        
Representative  Kawasaki asked  if the  automatic adjustment                                                                    
typically pegged  to a specific  dollar amount  or something                                                                    
else. Ms.  Westcott answered that  it was typically  tied to                                                                    
the  state's average  weekly  wage or  a  percentage of  the                                                                    
state's average weekly wage.                                                                                                    
Representative  Kawasaki  reported  that  in  Section  2  it                                                                    
stated that  the department  would increase  weekly benefits                                                                    
$2 for  each $250.  He wondered  why the  amount was  set in                                                                    
place. Representative Tuck responded  that it was already in                                                                    
statute.  The  bill was  lifting  the  amount to  about  the                                                                    
national average for those individuals  making more than the                                                                    
average per week. He referred  to Page 2 which reflected the                                                                    
same  formula, only  it extended  the higher  maximum amount                                                                    
paid out.                                                                                                                       
2:55:59 PM                                                                                                                    
Co-Chair  Seaton referred  to  Page 5  of  the handout  that                                                                    
reviewed the  weekly benefit amounts.  The page  was titled,                                                                    
"Recipiency  Rates."  He noted  that  Alaska  was the  ninth                                                                    
state on the list. He  asked about the meaning of recipiency                                                                    
rate and  whether Alaska's rate  was good or bad.  He wanted                                                                    
to better understand the term.                                                                                                  
Mr.  Weller answered  that  recipiency  rates reflected  the                                                                    
percentage of  those who were  unemployed, eligible  for UI,                                                                    
and  those that  were actually  collecting UI.  He suggested                                                                    
that the state would want to  see as many of the people that                                                                    
were eligible for the program  file for and collect benefits                                                                    
if  possible. Research  showed that  it helped  to stimulate                                                                    
the   economy  and   provide   short-term  income,   keeping                                                                    
individuals  in a  geographical  area and  allowing them  to                                                                    
reattach to work more quickly.                                                                                                  
Co-Chair Seaton  asked Mr. Weller  to review  the percentage                                                                    
rates. Alaska  was at 37  percent. He wondered  what factors                                                                    
lead  to Alaska's  percentage being  so  high. Ms.  Westcott                                                                    
responded  that  each  state  had  its  own  unique  set  of                                                                    
eligibility  requirements. In  addition to  being monetarily                                                                    
eligible for  UI, there were  non-monetary disqualifications                                                                    
such as  why someone was  not working or  their availability                                                                    
for fulltime  work. Fluctuations  in recipiency  rates could                                                                    
be  seen   from  state-to-state  depending  on   what  other                                                                    
disqualifications states might have in their laws.                                                                              
Vice-Chair Gara stated  that UI was available  to people who                                                                    
were laid off.  He asked if there was a  distinction that if                                                                    
someone  was  terminated  for  cause,   they  would  not  be                                                                    
eligible  for UI.  Ms. Westcott  confirmed  that Alaska  had                                                                    
disqualifications. For  instance, if someone  was terminated                                                                    
for cause, or if someone  voluntarily quit their job without                                                                    
good cause, there was a  6-week disqualification of benefits                                                                    
under those circumstances.                                                                                                      
Vice-Chair Gara asked if Ms.  Westcott meant that there were                                                                    
6  weeks   of  benefits.  Ms.  Westcott   responded  in  the                                                                    
negative.   They  would   be  disqualified   from  receiving                                                                    
benefits  for  the  first  week   of  unemployment  and  the                                                                    
following 5  weeks. There was  also a 3-week  deduction from                                                                    
the maximum amount  that a person was eligible  for over the                                                                    
term of their benefit year.                                                                                                     
2:59:57 PM                                                                                                                    
Representative  Wilson asked  for  a response  about how  it                                                                    
would impact small business in a negative way.                                                                                  
Representative Pruitt asked about  the numbers listed at the                                                                    
bottom of one  of the handouts provided by  the bill sponsor                                                                    
[Weekly Benefit  Amount Proposal -  Page 1] (copy  on file).                                                                    
He asked  if the  increases listed would  take place  if the                                                                    
bill was enacted. Mr. Weller responded that he was correct.                                                                     
HB  142  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair  Foster  reviewed  the  agenda  for  the  following                                                                    
Representative  Wilson made  the comment  that she  had just                                                                    
received a  new iPad.  She thought iPads  should be  used in                                                                    
lieu of paper.                                                                                                                  
Co-Chair Foster  stated the Co-Chairs would  think about the                                                                    

Document Name Date/Time Subjects
HB142 Memo of Changes 4.15.17.pdf HFIN 5/9/2017 1:30:00 PM
HB 142
HB142 Additional Documents-Unemployment Insurance Handbook 4.15.17.pdf HFIN 5/9/2017 1:30:00 PM
HB 142
HB 142 Additional Documents-WBA charts 4.15.17.pdf HFIN 5/9/2017 1:30:00 PM
HB 142
HB142 Opposing Documents - Opposition Letters 4.15.17.pdf HFIN 5/9/2017 1:30:00 PM
HB 142
HB142 Sectional Analysis 4.15.17.pdf HFIN 5/9/2017 1:30:00 PM
HB 142
HB142 Sponsor Statement 4.15.17.pdf HFIN 5/9/2017 1:30:00 PM
HB 142
HB142 Supporting Document - Support Letters 4.15.17.pdf HFIN 5/9/2017 1:30:00 PM
HB 142
HB142 Supporting Document-MWBA Analysis 4.15.17.pdf HFIN 5/9/2017 1:30:00 PM
HB 142
HB 74 Real ID Letter from Commissioner Fisher May 5 2017.pdf HFIN 5/9/2017 1:30:00 PM
HB 74
HB 124 Amendment 2 Foster.pdf HFIN 5/9/2017 1:30:00 PM
HB 124
HB 124 Amendment 1 Foster v.D.1.pdf HFIN 5/9/2017 1:30:00 PM
HB 124
HB 74 Amendments 1 - 4.pdf HFIN 5/9/2017 1:30:00 PM
HB 74
HB 74 _ background_complications of not retaining documents from non-compliant IDS.pdf HFIN 5/9/2017 1:30:00 PM
HB 74
HB 74 Native Am Airport Screening .pdf HFIN 5/9/2017 1:30:00 PM
HB 74
HB74_Oppose_050917.pdf HFIN 5/9/2017 1:30:00 PM
HB 74
HB74_Support_050917.pdf HFIN 5/9/2017 1:30:00 PM
HB 74
HB 74 Amendment NEW NEW 1.PDF HFIN 5/9/2017 1:30:00 PM
HB 74
HB 74 Amendment 5 .PDF HFIN 5/9/2017 1:30:00 PM
HB 74
HB 74 _ background_complications of not retaining documents from non-compliant IDS.pdf HFIN 5/9/2017 1:30:00 PM
HB 74