Legislature(2013 - 2014)BARNES 124

03/05/2013 08:00 AM House LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Meeting Continued from 3/4/13 --
-- Please Note Location & Time Change --
+= HB 71 AK REGIONAL ECONOMIC ASSISTANCE PROGRAM TELECONFERENCED
Moved CSHB 71(L&C) Out of Committee
*+ HB 84 MILITARY TRAINING CREDIT/TEMP. LICENSE TELECONFERENCED
Moved Out of Committee
*+ HB 76 UNEMPLOYMENT; ELEC. FILING OF LABOR INFO TELECONFERENCED
Heard & Held
+= HB 74 AIDEA: LNG PROJECT; DIVIDENDS; FINANCING TELECONFERENCED
Heard & Held
         HB 76-UNEMPLOYMENT; ELEC. FILING OF LABOR INFO                                                                     
                                                                                                                                
8:55:24 AM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the  next order of business  would be                                                               
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."                                                                                                             
                                                                                                                                
8:55:37 AM                                                                                                                    
                                                                                                                                
DIANNE  BLUMER, Commissioner,  Department  of  Labor &  Workforce                                                               
Development,  introduced  herself  and other  departmental  staff                                                               
present.                                                                                                                        
                                                                                                                                
8:57:00 AM                                                                                                                    
                                                                                                                                
BRYNN KEITH,  Acting Deputy Commissioner,  Department of  Labor &                                                               
Workforce  Development  (DLWD),  stated  that  HB  76  does  four                                                               
things.   First,  it would  allow  for the  electronic filing  of                                                               
reports and documents.  Second,  it will improve the department's                                                               
ability  to recoup  fraudulent  unemployment insurance  payments.                                                               
Third, it would adopt minor  changes to bring the department into                                                               
conformance  with  federal  law  that  governs  the  unemployment                                                               
insurance program.  Fourth, it  would change how unemployment tax                                                               
rates  are set  in  order to  keep  more money  in  the hands  of                                                               
Alaska's employers  and employees, and to  keep money circulating                                                               
through the economy  while protecting the integrity  of the trust                                                               
fund.                                                                                                                           
                                                                                                                                
8:57:49 AM                                                                                                                    
                                                                                                                                
PAUL DICK, Director, Employment  Security Division, Department of                                                               
Labor  &  Workforce  Development  (DLWD), offered  to  provide  a                                                               
section by  section analysis of  the bill, with  brief commentary                                                               
on each  section.  He  explained that Section  1 would add  a new                                                               
section  authorizing  the  commissioner  the  use  of  electronic                                                               
filing  methods  in  place  of  paper,  which  is  a  measure  to                                                               
modernize  the division  and  is an  efficiency  measure for  the                                                               
state.  Section 2 would  authorize the legislature to appropriate                                                               
funds  to  the  Unemployment  Trust  Fund,  in  conjunction  with                                                               
Sections 5 and 6, which will be covered later.                                                                                  
                                                                                                                                
8:59:18 AM                                                                                                                    
                                                                                                                                
MR.  DICK stated  that Section  3 would  conform to  federal law,                                                               
which   essentially   will   prohibit  relief   of   charges   to                                                               
reimbursable  employers,  which  are  governmental  agencies  for                                                               
which  the department  processes their  benefits and  charge them                                                               
back for  the benefits the  department paid out.   He highlighted                                                               
that  this  section would  apply  to  employers with  a  repeated                                                               
pattern  of  failure  for untimely  response  to  the  division's                                                               
request.   He  contrasted the  number of  governmental employers,                                                               
200  governmental employers,  with the  18,000 private  employers                                                               
and noted that the division has  not had any specific issues with                                                               
governmental employers  responding to requests.   Section 4 would                                                               
repeal and  reenact AS  23.20.290 (f),  replacing a  table method                                                               
for determining  unemployment insolvency adjustments with  a more                                                               
precise  calculation  method.   As  part  of  the tax  rate,  the                                                               
Unemployment  Insurance  (UI)   trust  fund  solvency  adjustment                                                               
examines  the  fund's solvency  in  comparison  to wages.    This                                                               
basically would collapse  the table into verbiage  and would take                                                               
the  calculation from  tenths of  a  percent to  hundredths of  a                                                               
percent.     Section  5  would  authorize   the  commissioner  to                                                               
eliminate or reduce increases in  unemployment insurance (UI) tax                                                               
rates.   This  would only  apply to  given years  within the  tax                                                               
rate, conditional upon another measure  of solvency - the average                                                               
high cost  multiple -  or the measure  of solvency  calculated by                                                               
the   U.S.   Department   of  Labor   Employment   and   Training                                                               
Administration.  The rate would  be calculated at 0.8 or greater.                                                               
This section  is intended to  provide UI tax relief  to employers                                                               
during  times when  the economy  is in  recession, deferring  the                                                               
taxes  to  subsequent  years  when the  economy  is  growing  and                                                               
healthy  and pertains  only to  years in  which the  tax rate  is                                                               
being increased.                                                                                                                
                                                                                                                                
9:02:04 AM                                                                                                                    
                                                                                                                                
MR. DICK  informed the committee  that Section 6 would  bring the                                                               
state into  conformity with  federal law  [Public Law  112-40] by                                                               
removing  the department's  authority  to waive  collection of  a                                                               
penalty  established due  to misrepresentation.   Section  6 also                                                               
would  require  a minimum  of  30  percent  of the  UI  penalties                                                               
collected  due to  misrepresentation to  be deposited  to the  UI                                                               
Trust  Fund.    He  reported that  currently,  those  funds  from                                                               
penalties are  deposited in the  general fund.  This  federal law                                                               
conformity  would dictate  that 30  percent of  the penalties  be                                                               
deposited  to  the  UI  Trust Fund,  which  benefits  the  fund's                                                               
balance  and  can  help mitigate  tax  increases  for  employers.                                                               
Section 7  would authorize  the department  to participate  in an                                                               
offset program  called the Treasury  Offset Program.   Currently,                                                               
21 states participate in the  program.  This would become another                                                               
tool  to  aid  the  department  in collections,  he  said.    The                                                               
department   already   offsets   liabilities  through   the   PFD                                                               
garnishment program.   This would expand this effort  and be very                                                               
beneficial to  the state since  it would give the  department the                                                               
authority to offset federal income  tax refunds from out-of-state                                                               
people who are out of jurisdiction  and from whom it is difficult                                                               
to collect.                                                                                                                     
                                                                                                                                
MR. DICK  moved on to Section  8, which would amend  AS 23.20.520                                                               
by  adding   a  new  paragraph  to   define  "covered  employment                                                               
compensation  debt"  in  accordance  with  the  federal  statutes                                                               
definition.   Section 9  would amend  the state's  uncodified law                                                               
specifying that AS 23.20.279, Section  3 of this bill, applies to                                                               
overpaid benefits established  after October 21, 2013  - the date                                                               
which  ties  into federal  law  that  requires enactment  of  the                                                               
conformity provision  by that  date.   Sections 10-12  pertain to                                                               
effective dates and the authority to adopt regulations.                                                                         
                                                                                                                                
9:04:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON referred to  a chart in members' packets                                                               
entitled,  "Unemployment   Insurance  Trust  Fund   Balances  and                                                               
Benefits  Paid/Taxes  Collected  2005-2012."    He  compared  the                                                               
actual fund  balance on  September 30, 2012,  to what  would have                                                               
occurred if HB 76  had been in effect.   Although the differences                                                               
from  2005  to  2010  are  marginal  as  there  is  virtually  no                                                               
difference  in  the  net  balance   for  the  first  five  years.                                                               
However,  then  a  marked  change   occurs.    He  asked  for  an                                                               
explanation  of  the change.    For  example,  in 2009  the  fund                                                               
balance  for the  department was  $319 million,  but under  HB 76                                                               
would  be  $313 million,  but  last  year  the figures  are  $264                                                               
million  versus under  this  bill  $189 million.    He asked  the                                                               
reason for the significant disparity that begins in 2010.                                                                       
                                                                                                                                
MS. KEITH replied  that there are a lot of  moving parts in these                                                               
calculations.   Not only  would the division  suspend all  of the                                                               
tax  increases  during these  periods,  but  the division  has  a                                                               
solvency adjustment,  which allows the department  to increase or                                                               
decrease to  a certain  degree.   Additionally, the  division has                                                               
penalties that flow  into the fund.  She reiterated  that lots of                                                               
moving  pieces affect  the calculations.   She  characterized the                                                               
figures  at  the  end  of  2012 as  a  cumulative  result.    She                                                               
suggested it  might be helpful  to go back some  additional years                                                               
to provide an extended period to better view the overall effect.                                                                
                                                                                                                                
MR. DICK  added that in 2009  the U.S. went into  a recession and                                                               
the  division sees  the effects  of cost  increases during  these                                                               
years, which  resulted in  increases in rates  in the  last three                                                               
years.  The chart reflects  the cumulative rate increase for each                                                               
of  those  years, which  results  in  a  further decline  in  the                                                               
balance.   He added that with  HB 76, which is  essentially a tax                                                               
deferral program,  the trust  fund will  work its  way up  to the                                                               
targeted rate  of 3 percent  over the  years when the  economy is                                                               
growing and rates would have been  going down.  He described this                                                               
as  a concept  for  tax  deferral and  in  the subsequent  years,                                                               
assuming the  state is  beyond the recession  and the  economy is                                                               
growing.  One  of the moving parts in the  overall formula of the                                                               
tax  rate is  benefit costs  compared to  wages.   Thus, as  more                                                               
people are employed, the employment  rate decreases and the costs                                                               
decrease  and  normally  the  division  would  experience  a  tax                                                               
decrease.  However, because of  the trust fund factor working its                                                               
way  up to  a  targeted  rate, the  tax  increase is  essentially                                                               
deferred into subsequent years.                                                                                                 
                                                                                                                                
9:09:36 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON inquired as  to the maximum unemployment                                                               
benefits in Alaska.                                                                                                             
                                                                                                                                
MR. DICK answered  that the maximum unemployment  benefit is $370                                                               
per week and the minimum amount is $56 per week.                                                                                
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  asked  how that  compares  with  other                                                               
states' benefits.                                                                                                               
                                                                                                                                
MR. DICK responded that Alaska  is approximately in the middle of                                                               
the pack.  He offered  that some states pay unemployment benefits                                                               
of $550 so Alaska maybe a bit above the middle.                                                                                 
                                                                                                                                
REPRESENTATIVE   JOSEPHSON   asked   whether   the   Unemployment                                                               
Insurance Trust Fund has ever been insolvent.                                                                                   
                                                                                                                                
MR. DICK  replied no,  adding that  the UI  trust fund  has never                                                               
been insolvent since statehood.                                                                                                 
                                                                                                                                
9:10:49 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON asked whether  the current system allows                                                               
for peaks and valleys that is boom and bust cycles.                                                                             
                                                                                                                                
MR.  DICK answered  yes;  the current  system  allows a  solvency                                                               
adjustment.   As the  economy weakens the  UI Trust  Fund balance                                                               
will  typically  decrease,  which  then  reverses  with  economic                                                               
upswing.   He acknowledged  the fluctuation  and referred  to the                                                               
table in  members' packets entitled, "Alaska  Department of Labor                                                               
&  Workforce   Development  Employment  and   Security  Division,                                                               
Historical  Average Combined  UI Contribution  Rates, Rate  Class                                                               
10," which ranges from 4.84 to  low of 1.65.  The rates fluctuate                                                               
between years and if one were  to overlay a chart of the economy,                                                               
the relationship would be visible, he said.                                                                                     
                                                                                                                                
9:12:10 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  related  his  understanding  that  the                                                               
current  system  allows  for some  departmental  flexibility,  to                                                               
increase  or decrease,  in  terms of  the  employee and  employer                                                               
rates.                                                                                                                          
                                                                                                                                
MR.  DICK clarified  that  the rates  are  established through  a                                                               
formula in  statute, and  thus the department  does not  have any                                                               
discretionary at this time.                                                                                                     
                                                                                                                                
REPRESENTATIVE JOSEPHSON  asked what the federal  government does                                                               
in the  event the state under  collects and a greater  demand for                                                               
unemployment exists.                                                                                                            
                                                                                                                                
MR. DICK answered that the  federal government has guidelines for                                                               
reviewing trust funds.   First of all, penalties  are not imposed                                                               
for  becoming   insolvent;  however,  the   federal  unemployment                                                               
program requires states to continue to  pay UI benefits.  As many                                                               
as 32  states have had to  borrow to pay these  benefits and have                                                               
had to subsequently repay the federal government with interest.                                                                 
                                                                                                                                
9:13:50 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  asked  how  the  other  states  became                                                               
insolvent and how does Alaska avoid it.                                                                                         
                                                                                                                                
MR.  DICK  responded  that  although  he  is  not  familiar  with                                                               
programs or  systems in other  states, he believes the  issue has                                                               
been driven by  the economy and recessions in those  states.  For                                                               
example, California currently owes  $10 billion and Michigan also                                                               
has substantial debt.  He reiterated  that he has not studied the                                                               
interplay between the system and their economies.                                                                               
                                                                                                                                
REPRESENTATIVE  JOSEPHSON related  his understanding  that Alaska                                                               
is  one of  18  states  that have  never  been  in an  insolvency                                                               
situation.                                                                                                                      
                                                                                                                                
MR. DICK answered that is correct.                                                                                              
                                                                                                                                
9:14:48 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD remarked that  the electronic filing is a                                                               
great idea.   This bill  helps Alaska be federally  compliant and                                                               
businesses  be sustainable.   She  commented that  Alaska is  not                                                               
doing  so  well   compared  to  other  states   with  respect  to                                                               
competition.   She said  there isn't any  cost to  the department                                                               
and it  seems as though it  will streamline the process  and make                                                               
things more  efficient.  She  thanked Mr. Dick for  bringing this                                                               
forward.                                                                                                                        
                                                                                                                                
9:15:41 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHENAULT referred to Section  5 of the bill, which                                                               
will  give the  commissioner a  lot leeway  in suspending  all or                                                               
part of  the unemployment rates.   He asked whether there  is any                                                               
concern with the  ability to adjust .3  percent yearly regardless                                                               
of the unemployment rates.                                                                                                      
                                                                                                                                
MR. DICK answered  that currently the structure is  such that the                                                               
UI Trust Fund  solvency adjustment can only  increase or decrease                                                               
by .3  percent per year.   Section 4 would remove  the .3 percent                                                               
decrease aspect.  Therefore, the  department would still have the                                                               
ability to implement a .3  percent increase, which is intended to                                                               
provide protection to  employers, to stair step, and  in years of                                                               
increase to  increase the rate.   He informed the  committee that                                                               
the department  believes the .3  percent limitation  on decreases                                                               
should  be   eliminated  when  the  economy   recovers  to  allow                                                               
employers more  tax relief,  get more money  in the  economy, and                                                               
help the economy grow even more.                                                                                                
                                                                                                                                
9:17:21 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CHENAULT asked  who pays  the federal  government                                                               
unemployment benefits.                                                                                                          
                                                                                                                                
MR. DICK  answered that  the federal  benefits the  division pays                                                               
out is 100 percent reimbursed by the federal government.                                                                        
                                                                                                                                
9:18:14 AM                                                                                                                    
                                                                                                                                
DON  ETHRIDGE,  Lobbyist, Alaska  State  AFL-CIO,  said that  the                                                               
Alaska AFL-CIO supports  the fraud protection measures  in HB 76,                                                               
but does  not support Section 5.   He expressed concern  that the                                                               
changes in Section  4 add politics into  a formula-driven process                                                               
that has  worked for many  years.   After all, Alaska  is solvent                                                               
and  doesn't have  to go  to  the federal  government for  money.                                                               
Currently,  state and  federal budget  cuts are  being discussed,                                                               
including  cuts  to  the capital  budget.    Construction  trades                                                               
depend on unemployment benefits during  the winter to avoid going                                                               
to the  Lower 48  for work.   He concluded  that politics  is the                                                               
wrong way  to go  to address [the  UI tax rates].   He  asked the                                                               
committee to  consider adjusting the calculations  if the formula                                                               
needs  adjusting and  encouraged the  committee not  to introduce                                                               
politics into the equation.                                                                                                     
                                                                                                                                
9:20:34 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MILLETT requested  clarification  as  to how  Mr.                                                               
Etheridge  believes politics  play  a role  in  this rather  than                                                               
viewing  the  amount of  unemployment  collected  as an  economic                                                               
decision.   She said she did  not view Section 5  as politicizing                                                               
the movement of the unemployment rate.                                                                                          
                                                                                                                                
MR.  ETHRIDGE answered  that if  the commissioner  is making  the                                                               
decision, the  pressure would  be on  the commissioner  to reduce                                                               
the unemployment rate, whether or not it is viable to do so.                                                                    
                                                                                                                                
REPRESENTATIVE  MILLETT  disagreed that  there  would  ever be  a                                                               
scenario in which the DLWD  commissioner would place the UI Trust                                                               
Fund in  jeopardy.  In  fact, she  suggested the effect  would be                                                               
the exact opposite  in that the reduction [of UI  taxes under the                                                               
bill] would  come at  a time when  the economy  needs adjustment.                                                               
She maintained  it isn't always  about politics, but  rather what                                                               
is best  for the economy and  the employee.  She  maintained that                                                               
neither  the commissioner  nor the  governor  would put  Alaska's                                                               
unemployment benefits at risk.                                                                                                  
                                                                                                                                
MR.  ETHERIDGE  said  he  hoped   that  would  be  true,  but  he                                                               
maintained his concerns.                                                                                                        
                                                                                                                                
9:23:06 AM                                                                                                                    
                                                                                                                                
PAUL GROSSI,  Lobbyist, Alaska  State Pipe  Trades UA  Local 375;                                                               
Ironworker  Management Progressive  Action  Cooperative, said  he                                                               
shares the  same concerns [as  Mr. Etheridge].   He characterized                                                               
the bill as  basically a housekeeping bill, the  vast majority of                                                               
which he supports, to help  the department perform its job better                                                               
and  better  comply  with  federal  requirements.    However,  he                                                               
expressed concern  over Section 5  of HB  76.  He  explained that                                                               
the  formula  was put  into  place  over  30  years ago  and  was                                                               
designed by David  Teal, the [legislative fiscal  analyst in the]                                                               
Legislative  Finance Division.   Thus  far it's  worked perfectly                                                               
without any insolvency  - for over 30 years.   In the good times,                                                               
he  predicted the  proposed  changes will  work  well and  assist                                                               
employers.  However,  in bad times it could  lead to underfunding                                                               
and should the economy take a  drastic downturn, it could lead to                                                               
insolvency or add to the possibility of insolvency.                                                                             
                                                                                                                                
MR. GROSSI explained that the  formula has a three-year look back                                                               
period with various  parts to the formula designed  to lessen the                                                               
increase and decrease in taxes  to employers and employees.  Thus                                                               
the formula is  designed to level out the peaks  and valleys.  He                                                               
expressed concern  that [HB 76,  Section 5] could  add additional                                                               
risk.    He related  that  his  clients  have employers  and  his                                                               
[clients] want  the employers  to get  the benefits;  however, he                                                               
was  unsure  how  much  benefit  [Section  5]  would  mean.    He                                                               
estimated that it  would probably range from $30  to $40 annually                                                               
per employee, which  isn't significant but could  help.  However,                                                               
if the formula  is such that it is currently  overfunding the [UI                                                               
Trust Fund], he  suggested changing the formula.   In fact, David                                                               
Teal is still available and no  one knows the formula better than                                                               
him, he said.  He cautioned  against placing this decision in the                                                               
hands of  one person.   Granted, he said  he trusts the  new DLWD                                                               
commissioner  and does  not  believe  anyone would  intentionally                                                               
harm the  fund, he pointed  out that predicting what  will happen                                                               
to the economy next year is difficult.                                                                                          
                                                                                                                                
9:27:21 AM                                                                                                                    
                                                                                                                                
MR. GROSSI maintained that if  the formula is overfunding [the UI                                                               
Trust  Fund],  then the  legislature  should  review the  formula                                                               
since it  is the legislature's  job to do so  and not the  job of                                                               
the DLWD commissioner.  The  legislature determines funding so if                                                               
a problem  with the  formula for  the UI  Trust Fund  exists, the                                                               
legislature should address it and not place the fund at risk.                                                                   
                                                                                                                                
MR. GROSSI  brought up another  point that would  help employers.                                                               
He  said that  if  the  [UI Trust]  fund  becomes insolvent,  the                                                               
federal  government  will   need  to  step  in   to  ensure  that                                                               
unemployment  benefits  are paid;  however,  the  state would  be                                                               
required  to   reimburse  the   federal  government   the  funds,                                                               
including interest.   In fact,  it really would be  the employers                                                               
who  would be  charged since  the UI  tax being  withheld is  the                                                               
employers' money.  Thus, while  the legislature is trying to help                                                               
employers  with this  bill, it  ultimately may  put employers  at                                                               
risk.  He urged members to thoroughly review this bill.                                                                         
                                                                                                                                
CHAIR  OLSON   said  the  commissioner  acted   appropriately  by                                                               
bringing this issue to the committee in the form of a bill.                                                                     
                                                                                                                                
9:29:19 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MILLETT related her  understanding that Mr. Grossi                                                               
trusts David Teal, and asked if  Mr. Grossi would rather Mr. Teal                                                               
make  the adjustments.   Representative  Millett opined  that the                                                               
formula doesn't need  to be rewritten; HB 76  merely requests the                                                               
latitude  to  make  a  small  adjustment to  the  formula.    She                                                               
questioned  whether the  concern  is with  the DLWD  commissioner                                                               
making the adjustment.   She suggested that [Section  5] does not                                                               
make a  significant request  nor would anyone  ever want  to ever                                                               
make the fund insolvent.  While  the increment and the benefit to                                                               
employers might be  minimal under the bill, it seems  like a wise                                                               
thing  to consider  when the  economy is  bad.   She asked  again                                                               
whether  Mr.  Grossi's objection  was  specifically  to the  DLWD                                                               
commissioner  making   the  decision  and  if   he  believes  the                                                               
legislative  finance analyst  is the  more appropriate  person to                                                               
make the determination.                                                                                                         
                                                                                                                                
MR.  GROSSI   clarified  that  he   trusts  the   current  DLWD's                                                               
commissioner,  but  he  emphasized  again that  the  formula  has                                                               
worked.   Therefore,  if the  formula  needs to  be adjusted,  it                                                               
should  be  reviewed.    "It's   not  David  Teal,"  although  he                                                               
obviously designed  is a good  system that has  never experienced                                                               
insolvency.    Although  California  and other  states  have  had                                                               
problems  with  insolvency,  Alaska  has  not,  even  though  the                                                               
economy  suffered severe  downturns such  as the  one during  the                                                               
mid-80s.    In  fact,  the  system  survived  the  mid-80s.    He                                                               
highlighted that  the good  thing about this  formula is  that it                                                               
considers the  [UI Trust] fund,  the number of employees,  plus a                                                               
whole  gambit of  factors, and  determines  what is  needed.   He                                                               
suggested if the  formula needs minor changes to  keep it working                                                               
effectively,  it  could  occur  while still  giving  employers  a                                                               
break.                                                                                                                          
                                                                                                                                
9:32:34 AM                                                                                                                    
                                                                                                                                
CHAIR OLSON  reiterated it is  within the  commissioner's purview                                                               
to make  this decision, but he  did not believe this  function is                                                               
in Mr. Teal's current job description.                                                                                          
                                                                                                                                
9:32:49 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON,   referring  to  page  3,   lines  23-26,                                                               
questioned whether  the issue or  concern with Section 5  is with                                                               
the  "in whole"  language  and if  it should  be  limited to  "in                                                               
part".                                                                                                                          
                                                                                                                                
MR. GROSSI  responded that  he doesn't know.   He  suggested that                                                               
the review  did not need to  be limited to Mr.  Teal, but perhaps                                                               
the  actuaries  and  Mr.  Teal   could  review  the  formula  and                                                               
determine  whether  it needs  to  be  changed to  give  employers                                                               
relief.   However, it should be  done in such a  way that doesn't                                                               
put  the fund  at  risk.   After all,  chances  are -  especially                                                               
during  the good  times  -  the changes  would  be  fine, but  if                                                               
overfunding  is the  issue, it  seems as  though that  adjustment                                                               
could be made  through the formula, which could  then suffice for                                                               
another 30  years.  He  agreed he does  not have the  solution to                                                               
this issue,  but reiterated that  it seems the actuaries  and Mr.                                                               
Teal could review the formula.                                                                                                  
                                                                                                                                
9:35:10 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON,   after  considering  the   comments  and                                                               
reading  Section  5,  suggested  the  committee  should  consider                                                               
deleting the  "in whole"  language from Section  5, but  keep the                                                               
"in part" language with side boards.                                                                                            
                                                                                                                                
CHAIR OLSON indicated he does not intend to move HB 76 today.                                                                   
                                                                                                                                
9:36:05 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MILLETT  referred to a letter  in members' packets                                                               
from  the  National  Federation of  Independent  Business  (NFIB)                                                               
dated  January  18,  2013,  from which  she  read  the  following                                                               
statement:  "House Bill 76  revises the contribution requirements                                                               
to keep  the trust fund  solvent and allows the  commissioner the                                                               
authority  to  eliminate  or  reduce  increases  in  unemployment                                                               
insurance  tax rates  when the  fund  is fully  funded, based  on                                                               
standards to  ensure the actuarial soundness  of the unemployment                                                               
trust fund."   She then asked  if Mr. Grossi agrees  or disagrees                                                               
with the statement.                                                                                                             
                                                                                                                                
MR. GROSSI  answered he  agrees with the  intent.   He maintained                                                               
his  concern  about the  uncertainty  of  whether the  fund  will                                                               
remain solvent.   He recalled Mr. Etheridge  indicated the future                                                               
is unknown.  In fact, none of  us knows the future.  He expressed                                                               
concern that  if the  [UI trust  fund] is  reduced and  the state                                                               
experiences a downturn  in the economy, it  would harm employers.                                                               
He suggested Representative Herron's  concept would at least make                                                               
it less of a possibility and is moving in right direction.                                                                      
                                                                                                                                
9:38:27 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MILLETT  pointed  out  that the  voice  of  small                                                               
businesses, the NFIB, is saying  they support the bill, while the                                                               
unions express fear that the commissioner  - who is very aware of                                                               
the state of  the fully funded UI [trust fund]  not being able to                                                               
make  a   small  adjustment.     "It   baffles  me,"   she  said.                                                               
Representative   Millett   remarked   that  it   seems   like   a                                                               
contradiction between  the union  and small business  owners, who                                                               
would be most affected.                                                                                                         
                                                                                                                                
MR.  GROSSI noted  that he  also represents  small employers  and                                                               
also  wants  to   help  small  employers,  but   wants  to  avoid                                                               
unintentionally harm to them or the fund.                                                                                       
                                                                                                                                
REPRESENTATIVE  MILLETT suggested  perhaps he  was worried  about                                                               
negligence.                                                                                                                     
                                                                                                                                
MR. GROSSI  answered that he  would characterize his  concern not                                                               
as pertaining to negligence but due to a lack of knowledge.                                                                     
                                                                                                                                
9:40:00 AM                                                                                                                    
                                                                                                                                
CHAIR OLSON offered  his belief that the  commissioner's goal and                                                               
the one  he stated  are similar.   He suggested  the commissioner                                                               
has the best interests of the state at hand.                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD said  this  is the  first  time she  has                                                               
heard insinuations  and mistrust  and she found  the undercurrent                                                               
as inappropriate.  She also  said she knows the commissioner, who                                                               
has a  reputation of working well  with labor.  She  said she was                                                               
unsure  if the  concern is  that under  the current  commissioner                                                               
that  insolvency would  result.   She highlighted  that the  NFIB                                                               
letter speaks loud  and clear in its support of  HB 76, and added                                                               
that the state needs to support its small businesses.                                                                           
                                                                                                                                
9:41:17 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON, with  due respect  to his  colleagues,                                                               
said   he   was   puzzled    by   Representative   Reinbold   and                                                               
Representative  Millett's comments,  who indicated  they seem  to                                                               
find differences  between management and  labor as shocking.   He                                                               
said, "I don't  find it shocking.  It's the  history of humanity.                                                               
It goes back  to the guilds in  the 1700s.  Of course  there is a                                                               
difference.  I woke  up knowing that.  I take  his - Mr. Grossi's                                                               
- comments  as just being  concerned about some employers  who he                                                               
represents ...."                                                                                                                
                                                                                                                                
CHAIR OLSON interjected  that this might be  best under committee                                                               
comments.  He  remarked he's appalled that someone  might think a                                                               
political decision is occasionally made in this building.                                                                       
                                                                                                                                
9:42:16 AM                                                                                                                    
                                                                                                                                
COMMISSIONER  BLUMER   said  that  although   HB  76   lists  the                                                               
commissioner of  the Department of Labor  & Workforce Development                                                               
(DLWD)  as the  decision-maker, she  cannot imagine  the decision                                                               
would  be made  in  a vacuum.   She  stressed  the importance  of                                                               
considering the best interests of  the state and highlighted that                                                               
the  current governor  would not  want to  put the  state in  the                                                               
position of borrowing  from the federal government.   She offered                                                               
her belief  that sideboards on  the bill exist that  defines when                                                               
the decision can be made, in  conjunction with the actuary.  Thus                                                               
the  decision would  not be  made in  a vacuum  and would  not be                                                               
harmful to businesses  in the state.  She concluded  that all who                                                               
know this administration know that wouldn't be the case.                                                                        
                                                                                                                                
9:43:32 AM                                                                                                                    
                                                                                                                                
DOUG  HOLMES,  President,  National Foundation  for  Unemployment                                                               
Compensation and Workers' Compensation,  stated he also serves as                                                               
the president of UWC, an  organization that monitors unemployment                                                               
insurance policy  and law  at the  federal and  state level.   He                                                               
provided  his   background,  including   his  service  as   a  UI                                                               
administrator, legal  counsel, and  Secretary of the  Council for                                                               
the  Ohio system.    He  retired from  state  service and  became                                                               
president of  the national organization.   He related  he watches                                                               
these issues closely  and often consults with  states on solvency                                                               
efforts  related  to  unemployment  insurance.   He  referred  to                                                               
Sections 4 and 5 of HB  76 and offered to provide his perspective                                                               
on  how Alaska  fits relative  to  other states  and the  federal                                                               
guidelines.   He  indicated that  Alaska is  in a  good place  in                                                               
terms of solvency of the UI trust fund.                                                                                         
                                                                                                                                
9:45:36 AM                                                                                                                    
                                                                                                                                
MR.  HOLMES, with  regard to  Section 5,  explained that  the .08                                                               
high  cost multiple  equates to  about  $230 million  so even  if                                                               
Alaska dropped to .08 it would  still have $230 million in the UI                                                               
trust  fund, which  would  be  a fairly  good  balance given  the                                                               
state's benefit payout  history.  He offered his  belief the risk                                                               
of insolvency  is minimal or  non-existent and suggested  that it                                                               
seemed reasonable to  place the review with  the commissioner and                                                               
actuary,  which would  provide some  flexibility  and enable  the                                                               
state to respond.                                                                                                               
                                                                                                                                
MR.  HOLMES  said  one  issue   that  arises  in  each  state  is                                                               
determining the appropriate trust fund  balance and the impact on                                                               
the ability  to keep money in  the state to use  for job creation                                                               
or to reduce  the cost of employment.  He  acknowledged this is a                                                               
judgment  call;  however,  Alaska's  unemployment  tax  rate  per                                                               
employee as a percent of  total wages is relatively high compared                                                               
to other states.   He also suggested the UI  trust fund [balance]                                                               
is high.   Hence, it seems  like an appropriate time  to consider                                                               
flexibility and  the language in  Section 5 is  suitable, doesn't                                                               
place the  state at risk,  and would give the  state flexibility.                                                               
Additionally, the interest  rate being provided for  the UI trust                                                               
fund balance is about 2.5 percent  and the interest is applied to                                                               
the UI  Trust Fund itself;  these are dedicated dollars  that are                                                               
part of  the federal unified budget  and can't be used  for other                                                               
purposes so  some restriction  exists.   Further, the  more money                                                               
deposited to the UI Trust  Fund may improve the overall solvency,                                                               
but it is only maintained in  federal unified budget and can't be                                                               
used for other purposes.                                                                                                        
                                                                                                                                
9:48:29 AM                                                                                                                    
                                                                                                                                
MR. HOLMES  summarized that Alaska is  in good shape in  terms of                                                               
the UI  Trust Fund as  a percent of  total wages and  the average                                                               
high cost  multiple.  Even if  the fund dropped to  the .08 rate,                                                               
the UI Trust Fund would still have a balance of $230 million.                                                                   
                                                                                                                                
9:48:59 AM                                                                                                                    
                                                                                                                                
[HB 76 was held over.]                                                                                                          
                                                                                                                                
9:49:25 AM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 9:49 a.m. to 9:53 a.m.                                                                       
                                                                                                                                

Document Name Date/Time Subjects
HB71 Supporting Documents-Assorted Letters of Support 3-1-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 71
HB84 ver A.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 84
HB84 Sponsor Statement.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 84
HB84 Sectional Analysis.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 84
HB84 Supporting Documents-Letter Ed Kringer DOD 2-11-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 84
HB84 Supporting Documents-Testimony-Mark San Souci Regional Liaison NW DOD 02182013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 84
HB76 ver A.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Transmittal Letter 1-17-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Sectional Analysis 1-21-2012.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Fiscal Note-DOLWD-CO-1-17-13.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Fiscal Note-DOLWD-UI-1-17-13.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Supporting Documents-DOLWD Q&A 1-28-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Supporting Document-UI STEP TVEP flow chart 1-29-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Supporting Documents-UI Trust Fund Balances 2-14-2013 pdf.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Supporting Documents-Letter NFIB 1-18-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Supporting Documents-Treasury Offset Program 2-14-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Supporting Documents-Historical UI Rates 1-21-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Opposing Documents-Letter AK AFL-CIO 2-20-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB76 Opposing Documents-Letter AK District Council of Laborers 2-25-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB74 Supporting Documents-AIDEA-AEA Policy Presentation 3-4-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 74
HB74 Supporting Documents-Op Ed Newsminer - Fairbanks Chamber 2-16-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 74
HB74 Supporting Documents-AIDEA Project Analysis Process 2-26-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 74
HB74 Supporting Documents-Committee Questions & Answers 2-26-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 74
HB74 Supporting Documents-Interior Energy Plan.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 74
HB74 Supporting Documents-Letter-GFCC 2-15-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 74
HB74 Supporting Documents-North Pole Resolution(1) 2-4-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 74
HB74 Supporting Documents-North Pole Resolution(2) 2-4-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 74
HB71 Draft Proposed CS ver U.PDF HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 71
HB76 Opposing Documents-Letter Teamsters Local 959 3-4-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 76
HB74 Supporting Documents-Letter Teamsters Local 959 3-4-2013.pdf HL&C 3/4/2013 3:15:00 PM
HL&C 3/5/2013 8:00:00 AM
HB 74