Legislature(1995 - 1996)
04/17/1996 03:10 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 483 - CALCULATION OF UNEMPLOYMT INS BENEFITS Number 069 CHAIRMAN PETE KOTT announced the first order of business would be HB 483, "An Act relating to the calculation of unemployment insurance benefits; and providing for an effective date." Chairman Kott said the committee has previously heard HB 483 and the bill has taken a different approach from the previous bill that was before the committee. It decreases the employer contribution slightly and increases the employee contribution slightly. Number 149 REPRESENTATIVE BEVERLY MASEK moved that the committee adopt CSHB 483(L&C). CHAIRMAN KOTT asked if there was an objection. Hearing none, CSHB 483(L&C) was before the committee. Number 169 DWIGHT PERKINS, Special Assistant, Office of the Commissioner Department of Labor, was first to testify. Mr. Perkins stated that before he would explain the changes that have occurred, he would give a historical view of the program. He read the following statement into the record: "For years, the unemployment insurance system has enabled Alaskan workers, their families and their communities to weather periods of unemployment with their economic well-being and dignity intact. Recent events in Sitka and Wrangell, as well as in other areas of the state affected by plant closures or layoffs, have demonstrated all too well the importance of this safety net for our working men and women. "The schedule of benefits for unemployment insurance has not been adjusted to increase the maximum weekly benefit amount since 1990. Alaska currently ranks forty-ninth 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 thirty-fifth in the nation, notwithstanding the higher cost of living here. "I want to emphasize that this is a modest proposal. The bill would raise Alaska's wage replacement less than 1 percent, to a little over 28 percent. While not enough to change our wage replacement ranking amongst the states, this small change would provide a measure of additional security to Alaska's average wage earners and help slow the erosion of purchasing power during hard times. "As we work together to strengthen Alaska's economy to provide quality jobs for Alaska's families and to move certain low-income people from welfare to work, we must ensure that there is an adequate safety net in place to allow unemployed workers sufficient finances to remain in their homes, in their communities, and in Alaska until they are reemployed." Number 430 MR. PERKINS stated in the version of the bill before the committee, 9-GH2027\C, Cramer, 4/16/96, is a big difference from the previous version. The bill is an act relating to employer and employee contribution rates for unemployment insurance and to the calculation of unemployment insurance benefits and providing for an effective date. Mr. Perkins explained it would become effective January 1, 1997, whereby the rate of contributions for each employer will go from 82 percent to 80 percent of the average benefit cost rate multiplied by the employer's experience factor set out in the table. In addition, the rate of contributions for an employer must be rounded to the nearest one-one hundredth. MR. PERKINS explained currently, the employee picks up 18 percent of the average benefit cost rate and that will increase to 20 percent. He referred to page 3 of the bill and said it is the beginning of the unemployment weekly benefit amount that an individual will receive. Mr. Perkins noted the wording from page 3 to page 6, line 3, is currently in statute. Mr. Perkins said, "What this bill proposes to do, in statute, because that was another difference - it was a floating rate that would have occurred based on income, the average income of the state is 75 percent of the average income in the old bill. That was a floating schedule of benefits. It would go up and down with the amount of wages made in particular years by the employee." Mr. Perkins said there was concern that it would not work in the best interest of certain parties. The legislature felt it would be more comfortable to have it in statute in the event that a down-turn in the economy went so bad it could have some significant changes in the amounts of the rate that the employee would receive. Number 635 MR. PERKINS referred to page 6, line 4, and said the new schedule starts at the maximum benefit amount of $22,250. For every $250 of wage increase, the weekly benefit amount will go up $2. It starts at $214 and reaches a maximum of $248 at 75 percent of the average annual wage base of $26,750. The maximum they will receive is $248. Mr. Perkins said today, the average annual is $22,250. Mr. Perkins discussed a chart he gave committee members titled, "Employer and Employee Contributions Under the Proposal to Cap the WBA (Weekly Benefit Amount) at $248 in 1997, Change the Employer/Employee Tax Share to 80/20, and Round the Employee Tax to the Nearest 100th." MR. PERKINS pointed out that it has been since 1990 that anything has been done. In the first proposal the department brought forward was going to be by a flexible cap. There were concerns about that. The current version before the committee is supported by the department and it is a very modest proposal. Mr. Perkins said he would answer any questions the committee may have. Number 110 CHAIRMAN KOTT indicated the new version is a good compromise solution to the problem and much of the concern expressed by industry has been addressed. He said it is fair that employees at least share in some of the burden rather than placing all of the burden on the shoulders of the employers. Number 1146 REPRESENTATIVE KIM ELTON questioned whether the previous fiscal note, dated February 27, still applies to the new version. MR. PERKINS gave committee members a new fiscal note that applies to the Senate version. CHAIRMAN KOTT noted there is a significant difference. REPRESENTATIVE ELTON said he can see why industry would be pleased. They would be saving $3 million and the cost would be transferred to the employees. He stated it is probably unfair to characterize this for all employees. The people at the low end of the wage scale will be paying more, but they will not see any more benefits. The only people that will get increased benefits are those at the upper end of the wage scale. MR. PERKINS referred to Representative Elton's concern regarding where the benefit amount starts and rises at the upper level as we know it today and said Representative Elton is correct. He said he wants to address Representative Elton's concern, but he doesn't want to sound biased to one group of wage earners over another. At the lower end of the weekly benefit amount based on $1,000, if you take those figures and see what the benefit amount is for the other end of the scale, you will see that just the opposite has occurred. He referred to the wage base in today's figures and said the average wage currently for Alaska above $22,000. Number 1354 CHAIRMAN KOTT said he believes the average earnings in Alaska is about $32,000. MR. PERKINS said that is correct. He stated that this is based on 75 percent of that average wage base. REPRESENTATIVE ELTON questioned whether it is fair to characterize that the low income people will be paying more and will not get any benefit. MR. PERKINS said Representative Elton is right in saying that but conversely just the opposite has been happening on the upper end. The upper end has been paying for the lower end in the benefit amount in the ratio by which they receive. In other words, they actually receive more percentage wise than the person making $22,250 based on the same amount of the unemployed weeks. Number 1430 REPRESENTATIVE BRIAN PORTER asked if another way to characterize the bill be to a redistribution of the costs and benefits based on a more equitable formula. MR. PERKINS said Representative Porter is close. That could be a characterization. Number 1450 REPRESENTATIVE GENE KUBINA said he looks at this differently in that the people at the low end probably have not worked full-time 40 hour weeks in order to have this low of a base. Number 1482 REPRESENTATIVE JERRY SANDERS said he thinks that Representative Kubina is correct. He said another thing that he thinks would be an advantage is that a lot of the people making a small wage over this period of time, not necessarily by the hour, are people from outside Alaska who work three or four months during the summer. They will be contributing a little higher rate and when they leave Alaska, they won't gain as much and the people in Alaska will. He stated he supports the bill. REPRESENTATIVE ELTON said his understanding is that a minimum wage job is $4.75 an hour in Alaska. That equates to about $10,000 a year. So somebody could be working full-time and make $10,000 a year which would place them down on the scale. He said it is not just part-time people the committee is taking about. Number 1539 CHAIRMAN KOTT said that is a valid point. To a large extent it wouldn't be under that scenario. There may, however, be other assistance programs that would be available to those people who are making $10,000 or under $16,000 per year. Number 1554 REPRESENTATIVE BEVERLY MASEK asked how many people are at the $22,000 level compared to employees that are at the lower level. MR. PERKINS said currently, 33 percent of the claimants are in the top range of the claimants receiving weekly benefit amounts. He said 33 percent of those claimants are crowded into the upper end. If you go from that point and work the distribution back to the other direction, you will find an interesting scenario. Mr. Perkins asked Mr. Torgerson to comment. Number 1616 RON TORGERSON, Chief Hearing Officer, Division of Employment Security, Department of Labor, informed the committee he worked on the draft of the bill. He said to keep in mind that the entire benefit schedule is based on less than average wages. So the people even at the very top end of the schedule who are making the maximum are qualifying on wages that are three quarters of the average wage in the state. It really isn't a windfall to the high- end wage earners. With the change, they will be qualifying on wages well below the average wage, approximately $26,000. Mr. Torgerson explained the schedule is a creature of legislative compromise and it over compensates employees at the bottom end of the scale and it under compensates people making close to the average wage. People at the very bottom end of the scale can actually draw out more in benefits than they made in base period wages, but the average replacement is only about 24 percent. The schedule is certainly is not top heavy in terms of who has been compensated. CHAIRMAN KOTT said there were no further witnesses to testify. Number 1696 REPRESENTATIVE KUBINA made a motion to move CSHB 483(L&C) out of committee with individual recommendations and the new accompanying fiscal note. MR. PERKINS pointed out that the fiscal note the committee members have is for a committee substitute of the Senate version of the bill. He said he will have a corrected version of the fiscal note for CSHB 483(L&C) before the committee adjourn. CHAIRMAN KOTT indicated that would be fine. He stated without objection CSHB 483(L&C) is moved out of the House Labor and Commerce Committee.
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