Legislature(1995 - 1996)

04/17/1996 03:10 PM L&C

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

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