04/13/2009 01:00 PM House JUDICIARY

HB 213 - UNEMPLOYMENT AMENDMENTS:TRIBES/NPO                                                                                   
                                                                                                                                
[Contains brief discussion  of SB 178, the  Senate companion bill                                                               
to HB  213, and SB 170,  the Senate bill into  which the language                                                               
of SB 178 was inserted.]                                                                                                        
                                                                                                                                
1:16:20 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS announced that the  final order of business would be                                                               
HOUSE BILL NO. 213, "An  Act relating to contributions, interest,                                                               
penalties,  and payments  under  the  Alaska Employment  Security                                                               
Act; and providing for an effective date."                                                                                      
                                                                                                                                
1:16:54 PM                                                                                                                    
                                                                                                                                
GUY  BELL, Assistant  Commissioner, Office  of the  Commissioner,                                                               
Department  of Labor  & Workforce  Development (DLWD),  explained                                                               
that passage  of HB  213 is  required in order  for the  State to                                                               
comply with the Federal Unemployment Tax Act (FUTA).                                                                            
                                                                                                                                
1:17:43 PM                                                                                                                    
                                                                                                                                
THOMAS W.  NELSON, D.Ed., Director,  Central Office,  Division of                                                               
Employment Security, Department of  Labor & Workforce Development                                                               
(DLWD), added  that Alaska is  part of a  nationwide unemployment                                                               
insurance  system,  and has  agreed  to  operate its  program  in                                                               
conformance with federal law -  specifically 26 U.S.C. 3304 - and                                                               
regulations for the administration  of the unemployment insurance                                                               
program.   In order  to be  in compliance  with the  FUTA, Alaska                                                               
must now  also cover  services performed  by employees  of tribal                                                               
entities, and  must give  federally-recognized tribes  the choice                                                               
of  becoming  reimbursable  employers   for  purposes  of  paying                                                               
unemployment  insurance   taxes.    Alaska  has   always  covered                                                               
employees of federally-recognized  tribal entities, but currently                                                               
only those entities on the  U.S. Department of the Interior (DOI)                                                               
list  of Native  entities  eligible for  services  from the  U.S.                                                               
Bureau of  Indian Affairs  (BIA) are to  be offered  this choice,                                                               
and there are a total of  229 Alaska Native entities on the DOI's                                                               
latest list [included in members' packets] dated April 4, 2008.                                                                 
                                                                                                                                
DR.  NELSON  explained  that  if  such  an  entity  chooses  this                                                               
reimbursement  method,  the  entity  would  be  subject  to  more                                                               
stringent  rules   such  as   having  to   pay  100   percent  of                                                               
unemployment  insurance  benefits  and 100  percent  of  extended                                                               
benefits, would  be under additional scrutiny  for late payments,                                                               
and would  be required to post  a surety bond.   Because of this,                                                               
it may  not benefit a  Native entity  to select this  option, but                                                               
the department  is prepared  to work with  each of  them, one-on-                                                               
one, to  layout the tax  history and  current tax rate  that each                                                               
employer has  so that the entity  can make informed choices.   If                                                               
State  law  conforms   to  federal  requirements,  [contributory]                                                               
employers  in Alaska  would continue  to receive  an annual  FUTA                                                               
credit totaling  5.4 percent,  currently valued  at approximately                                                               
$111  million, and  Alaska would  continue to  receive its  "base                                                               
fund" to  administer the unemployment  insurance program  - [this                                                               
base  fund] is  currently  valued at  approximately $20  million.                                                               
Dr. Nelson,  in response to  questions, said that [the  bill] was                                                               
prepared  before  the  start  of   the  legislative  session  but                                                               
required modification  before its  introduction, and that  it has                                                               
an immediate effective date.                                                                                                    
                                                                                                                                
1:21:14 PM                                                                                                                    
                                                                                                                                
MR. BELL, in  response to questions, said that there  is a Senate                                                               
companion bill -  [SB 178]; that the text of  that companion bill                                                               
has been added  to another piece of legislation -  [SB 170]; that                                                               
the  administration supports  [HB 213]  as a  stand-alone [bill];                                                               
that the  component now in [SB  170] that would enable  the State                                                               
to  comply with  the American  Recovery and  Reinvestment Act  of                                                               
2009 (ARRA) is  not supported by the administration;  and that SB
 passed the Senate this morning.                                                                                             
                                                                                                                                
REPRESENTATIVE COGHILL surmised that SB  170 would be referred to                                                               
the HFIN committee.                                                                                                             
                                                                                                                                
DR. NELSON,  in response to  further questions, said  that Alaska                                                               
has been  out of  compliance [with the  FUTA] for  several years;                                                               
that from the perspective of  the unemployment insurance program,                                                               
[HB 213's  proposed changes] are primarily  housekeeping changes,                                                               
addressing a method  of registering federally-recognized entities                                                               
so as  to be able  to pay  the appropriate taxes,  and clarifying                                                               
the  definitions  of  the  term  "employer";  that  the  proposed                                                               
changes  won't  give entities  an  unfair  business advantage  or                                                               
affect  their  current  tax  rates  or  require  them  to  become                                                               
reimbursable employers.   The analysis  done thus far  shows that                                                               
the   majority  of   entities   would   benefit  from   remaining                                                               
contributory employers, since they  currently only pay 76 percent                                                               
of  the  benefits,   with  the  remainder  being   borne  by  the                                                               
employee's contributions.                                                                                                       
                                                                                                                                
1:25:02 PM                                                                                                                    
                                                                                                                                
MR. BELL, in  response to further questions, said that  HB 213 is                                                               
completely  neutral  from  a tax  collection  perspective.    The                                                               
unemployment   insurance  program   is   supported  entirely   by                                                               
employers  and employees,  with the  funding being  maintained by                                                               
the federal  government and kept  solvent by taxes paid  into the                                                               
fund;  the  State administers  the  program,  but it's  based  on                                                               
federal  laws.   Again,  HB  213  allows  Alaska to  comply  with                                                               
federal  law.   There  are  two  methods of  paying  unemployment                                                               
insurance:   one is  through paying a  tax applicable  to private                                                               
employers  and most  other entities,  and the  other is  to be  a                                                               
reimbursable  employer, which  requires  the  employer to  become                                                               
self insured, reimbursing the system  for actual benefits paid to                                                               
employees that worked last for that employer.                                                                                   
                                                                                                                                
DR.  NELSON,  in response  to  more  questions, said  that  local                                                               
political  subdivisions and  private  nonprofit corporations  are                                                               
also  reimbursable employers;  some  examples  include Nine  Star                                                               
Enterprises,  Inc., Southeast  Regional Resource  Center (SERRC),                                                               
and Adult Learning Programs of Alaska.                                                                                          
                                                                                                                                
MR. BELL  clarified that such  entities have the option  of being                                                               
self insured,  but, again, a  number of employers may  choose not                                                               
to be  self insured  because they  would then  be liable  for 100                                                               
percent  of the  benefits,  so  generally it  can  often be  less                                                               
expensive to "go on to a tax rate" [as a contributory employer].                                                                
                                                                                                                                
DR. NELSON, in response to  questions, reiterated portions of his                                                               
earlier  explanation, adding  that  contributory employers  would                                                               
pay,  up  front,  a  rate  based on  their  history  of  employee                                                               
turnover.   In response to  further questions, he  concurred that                                                               
compliance with  the FUTA as  it relates  to federally-recognized                                                               
tribal  entities would  protect  the whole  FUTA  system for  all                                                               
Alaskan employers.                                                                                                              
                                                                                                                                
REPRESENTATIVE  COGHILL  characterized the  aforementioned  DOI's                                                               
list  of Alaska's  federally-recognized tribal  entities as  well                                                               
established.                                                                                                                    
                                                                                                                                
1:34:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAHLSTROM moved to report  HB 213 out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.   There being no objection,  HB 213 was reported  from the                                                               
House Judiciary Standing Committee.