Legislature(1997 - 1998)
04/17/1998 03:37 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 484 - UNEMPLOY EXEMPT AMATEUR SPORTS OFFICIAL Number 0007 CHAIRMAN ROKEBERG announced HB 484, "An Act exempting services of certain sports officials at amateur sporting events from coverage under the Alaska Employment Security Act; and providing for an effective date," is before the committee. CHAIRMAN ROKEBERG said the Senate and a number of people, particularly the folks in Representative Vezey's office, asked the committee to introduce a House Labor and Commerce bill. He stated this legislation is intended to exempt unemployment compensation requirements for tax liabilities of amateur sports officials for nonprofit and certain schools and we are endeavoring to influence the United States Congress to pass legislation to accommodate. Number 0018 DWIGHT PERKINS, Special Assistant, Office of the Commissioner, Department of Labor, appeared before the committee. He said, "Speaking on behalf of HB 484, it does exempt certain sports officials in amateur sporting events from coverage of Employment Security Act. There was a concern brought to the department's attention about liability of an employer and the tax liability they owe in the event a sports official applies for unemployment compensation. It is known in the industry that these usually aren't full-time jobs, as most cases not even a supplemental income. The folks do it, a lot of them do it to be with their kids while they're at their soccer games or the baseball games and they're compensated a small amount of money - maybe $8 or $10 or $15 per sporting event. What brought this to the attention of the department was that there was a claim filed by an individual and when it was recognized that they did work for an organization to be a sports official, because of federal law, we, the department must collect those taxes." MR. PERKINS continued, "The department is neutral on this legislation, we don't have a real concern exempting the sport officials based on the information we have received. And it is noted, as you said Mr. Chairman, that all parties involved here should encourage the Congressional Delegation to try to get legislation that would exempt nonprofits from the FUT (Federal Unemployment Tax) Act. So with that, the department does not have a concern with this legislation." He added that program people from the department are present to answer technical questions. CHAIRMAN ROKEBERG asked, isn't the amount of monies and the amount of pay so small that this could create an Administrative burden for the department. MR. PERKINS reiterated, if this is the only employment that an individual has, they have more concerns about making daily living payments than they do collecting unemployment insurance. It probably would be of the lower tier if they did qualify just based on those wages and the time period that it takes to qualify for unemployment benefits. REPRESENTATIVE JOHN COWDERY asked what would be the cost of insurance if it's required. Number 0054 MR. PERKINS stated, "The problem is, is that the employment tax liability on the nonprofits, and if they are required to pay into the trust fund, the concern is, is that the youth organizations ... and adult programs that are out there, the user fees, if you will, or the cost to play baseball, or hockey or those kinds of sports, would have to cover this unemployment tax." He said that's not to say that it's a horrendous amount, but when nonprofits are trying to make it and provide youth activities, and trying to get by on the least amount of money to pay for the sports officials and keep the programs going, it is a large amount to them. He noted it does represent quite a bit of an increase to the programs to cover that cost. REPRESENTATIVE COWDERY agreed. He indicated that that's what we're trying to achieve and could defeat some of it if we didn't weigh this. MR. PERKINS said he believes Representative Cowdery's analysis is correct and that the fear is that some programs may end up not continuing because of the tax liability on them. He reiterated that it isn't a large amount, but when you put it in perspective of the program itself - if they're going to have to pay another $5 or $10 for entry fees as a participant, some parents might not be able to afford that. REPRESENTATIVE COWDERY mentioned he has sponsored youth hockey, basketball and baseball teams. He said, "It's not inexpensive for some parents, that have large families, to come up with the money but - so I think that I would be - agree that I don't think this is a wise decision to implement it - a requirement." Number 0082 CHAIRMAN ROKEBERG referenced a January 21, 1998, letter to Rebecca Gamez, Director, Employment Security Division, Department of Labor, from the U.S. Department of Labor. He read, "Your state law to include coverage of these services, referring to the officiating for governmental entities and certain nonprofit organizations, must cover that or you face the possibility of being found out of conformity with federal law. Such a finding would mean a significant loss of funds to the state and a loss of federal tax credits to the employers." He asked what does that mean. MR. PERKINS replied, "Pretty much as you stated, in that if we are not in compliance, when an individual files for an unemployment claim it is the duty of the department to find out what employers that individual worked for. Then it is also our duty to make sure that the tax liability has been paid. If it has not, it is our responsibility to make sure that it does get paid." CHAIRMAN ROKEBERG asked, "We're talking about matched money, or what are we talking about dollar-wise, what are we losing." MR. PERKINS deferred the question to Director Gamez. Number 0096 REBECCA GAMEZ, Director, Employment Security Division, Department of Labor, appeared before the committee on HB 484. She pointed out the division is fully federally funded. She said it would mean that upwards of about $17 million to $20 million would be in jeopardy. That's the entire Unemployment Insurance administrative funding amount, and that's what is used to operate the Unemployment Insurance program in the state. CHAIRMAN ROKEBERG commented, Mr. Perkins, the department's only neutral in this. He then called on Representative Ryan. Number 0102 REPRESENTATIVE JOE RYAN stated the effective date is conditioned upon the federal law being changed. He added that's a "what if scenario," and indicated he didn't know why the committee is wasting a lot of time. He asked the chairman if he wanted a motion to move HB 484. CHAIRMAN ROKEBERG mentioned a number of witnesses haven't shown up. Number 0106 BOB WALKER, President, Anchorage Softball Umpires' Association, testified via teleconference in support of HB 484. He said, "Let me say this, I have a girl's (indisc.) program here in Anchorage that is not a funded program through the school district. Any increase whatsoever that has to deal with the administrative costs of my association ... will put that program in a severe handicap. I mean, these young ladies are doing bake sales, carwashes, their parents are doing all kinds of things to try to come up with the necessary funding for that program. Anything that would impact this umpires' association would also have to be passed onto the user group and that in turn would cause these programs to stumble, and in some cases fail. I would appreciate your consideration on this." MR. WALKER continued, "We're all working people of my association, we have regular jobs, so we submit our 1099's, we pay our taxes. We do this - I can almost guarantee you to the man and woman for the sheer enjoyment of the program. Many of us are ex-ballplayers and athletes that just do this because we love to stay in the game. I, for example, I had my sister go through college on a fast-pitch scholarship. So these are things that are important to me as an individual and to my organization. We do this for the fun of it. No one is making any money at this. But I've talked to the CPA (certified public accountant) that does the taxes for our particular nonprofit association and to do the payroll, the payroll exemption, and all the deductions that would go with that, and then you'd - it's a possibility of being throwing into the federal income tax realm. We're looking at conservatively - we figure 20 percent increase in our operating costs to do this. Myself, and all the rest of my board, including the treasurer that takes care of most of our finances, are indeed volunteers. None of us get paid for doing this. So I'd appreciate your favorable consideration in this particular bill and hopefully the Congressional group in Washington, Senators Stevens and Murkowski, can help us get some federal legislation that will help us as well." Number 0128 GARY MATTHEWS, Executive Director, Alaska School Activities Association, testified via teleconference in support of HB 484. He said, "The Alaska School Activities Association is a private nonprofit corporation that has 195 high school members in Alaska. We speak for those schools plus over 800 amateur sports officials that we license throughout Alaska. We're speaking in favor of this legislation. There are thousands of amateur sports officials in Alaska. They for the most part work as a labor of love, they get very little compensation, and I would say nearly all of them, if not all - they don't rely on the money they're making from officiating to provide their livelihood, they all have to have some other type of occupation. They provide their own uniforms, their own shoes, and in many cases, their own training, they pay to be licensed, and they're putting out a lot of time and expenses just to be able to officiate." MR. MATTHEWS continued, "In many of the smaller communities in the state, the local schools, the local high schools and the local organizations find officials themselves. They arrange with the officials to officiate their contests. In a larger community, there are official associations like in Anchorage and Fairbanks, and so forth. They're informed just to schedule officials so that the schools have a satisfactory and easy way of making sure that people will show up to officiate their games. If it's determined that these officials are covered by unemployment compensation, the costs to the schools will be greatly increased and I know that there are many other organizations that are not schools within Alaska that share that same concern. It's crucial to the schools in the state to make sure this legislation is passed. We support the federal legislation and we support both the Senate and House bill that would exempt amateur sports officials from the requirements of the Unemployment Compensation Act." CHAIRMAN ROKEBERG asked for written testimony. MR. MATTHEWS mentioned he had already submitted correspondence. Number 0150 CHAIRMAN ROKEBERG asked Mr. Matthews, "In the high school athletic realm here, do the umpires you normally hire, or referees, are they considered not independent contractors, or is there other forms of compensation or (indisc.)." MR. MATTHEWS replied they consider them independent contractors. Number 0153 PATRICIA LILLIAN, Commissioner, Alaska Amateur Softball Association, testified in support of HB 484 via teleconference. She said, "We sanction about a thousand teams and roughly 300 umpires annually. I'm speaking in support of HB 484. Statewide programs provide recreational and adult and youth softball opportunities in at least 20 communities. Within these areas, many of the local associations are viable partners with municipalities and city governments for program development and facility improvements. I believe that the failure to provide relief for the amateur sports officials in the areas as unemployment tax will affectively increase costs for all these programs. Youth programs are especially vulnerable in today's economy with school budgets being reduced in almost all areas." MS. LILLIAN continued, "In 1989, the Alaska Legislature passed a bill that exempted amateur sports officials from the unemployment taxes but they were forced to rescind this same bill in 1990 when it was determined by Region X that Alaska was in a noncompliance posture. In 1994 the Alaska Legislature passed a bill that exempts amateur sports officials from Workers Compensation Insurance payments. It seems to me that the Alaska Legislature has clearly indicated their intent to exempt amateur sports officials from these various tax kinds of situations. I would urge you to continue with this intent by adoption of HB 484." Number 0171 JOHN RENN, Secretary/Treasurer, Anchorage Football Association, testified in support of HB 484 via teleconference. He said, "We officiate high school football in the Anchorage area and we also officiate youth football in Anchorage and the Mat-Su valley area. We are in total support of HB 484. Our organization ... is a nonprofit organization, therefore, all of our incoming fees go to the people who officiate the games. The compensation of the game fees are relatively low and each official himself must pay for his own uniform, his own equipment, his own travel to and from the game, must pay for his federal taxes, must pay his liability insurance and all his certification fees. So as a result, someone who officiates a two-hour youth game, after he pays his expenses, winds up with about 8 or 10 bucks in his pocket. So our officials are lucky if we keep 50 percent of the fees. Any additional costs, such as the unemployment insurance, or any other taxes or insurance, obviously are going to have to go back to the high schools or the youth activity groups we support. As I said, we are in total support of the bill, 484, and I would like to thank you for your time in allowing me to testify." Number 0184 JACK HEESCH, Representing Farthest North Umpire's Association, said he is available to answer questions. He believes members of the association are on line in Fairbanks and can speak themselves. CHAIRMAN ROKEBERG noted the monitors don't indicate a connection to Fairbanks. He said, "Mr. Heesch, you've reviewed this situation, do you know of what do other states do in terms of this issue. Have they - do you have any idea on that, or have you been able to research that?" JACK HEESCH responded, the state he is most familiar with is California. He directed the committee's attention to the "Referee Magazine," which discusses a situation similar to ours. He noted that California adopted similar legislation and believes they did it without worrying about the federal legislation. He reiterated that's his understanding of what happened in California. JACK HEESCH further explained, "The truth of the matter is, nationally this is a much discussed issue both in terms of unemployment compensation, worker's compensation and the federal income tax, along with I suppose state income tax is where they have it. In most cases, organizations have chosen to treat amateur sports officials as independent contractors and that essentially is how they've been treated here in the state of Alaska for at least as long as I've been involved with sports here. And it was only when someone actually filed a claim, that the case comes before the Department of Labor, and the Department of Labor of course if obliged to take action on it. Up until this time, essentially the organization has moved along believing that these guys and women are essentially independent contractors. And that's generally how it's treated nationally, this is not just a local issue, it truly is a national issue and we are of course pressing forward with Senators Murkowski and Stevens, and to the extent that we will, where we have national organizations, will be seeking their support from their delegations throughout the country. I hope I'm answering your question." Number 0205 CHAIRMAN ROKEBERG asked Mr. Heesch to provide the committee with additional information about what's happening in other states before the bill goes to the floor. JACK HEESCH stated he could do that. Number 0209 REPRESENTATIVE COWDERY made a motion to move HB 484 with individual recommendations. He indicated it didn't have a fiscal note. CHAIRMAN ROKEBERG asked if there were any objections, There being none, HB 484 moved from the House Labor and Commerce Standing Committee. CHAIRMAN ROKEBERG called a brief at ease at 3:58 p.m. CHAIRMAN ROKEBERG called the meeting back to order at 4:00 p.m. CHAIRMAN ROKEBERG noted HB 484 didn't have a fiscal note and asked Mr. Perkins to provide one. MR. PERKINS mentioned a zero fiscal note should have been provided. REPRESENTATIVE RYAN pointed out the fiscal note in the packet. Number 0222 REPRESENTATIVE COWDERY amended his motion to include the zero fiscal note. There being no objections HB 484 moved from the House Labor and Commerce Standing Committee.
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