Legislature(1995 - 1996)
04/26/1995 09:10 AM Senate HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 2 UNEMPL'T COMP FOR SOME SCHOOL EMPLOYEES
Number 068
CHAIRMAN GREEN introduced SB 2 as the next order of business before
the committee.
SENATOR LINCOLN, prime sponsor, explained that SB 2 attempts to
correct an inequity for noncertified school employees who are
currently ineligible for unemployment compensation during the
summer months. She pointed out that the federal government changed
its law to allow these noncertified school employees to receive
unemployment, however, the Alaska Legislature has not done so.
Seasonal, local and state government, and private sector employees
can receive unemployment benefits during periods of unemployment.
Kitchen workers, school bus drivers, custodians, clerks, and
teacher's aides cannot receive unemployment benefits during periods
of unemployment. Furthermore, there is also inequity within the
jobs of some employees who perform similar jobs. She illustrated
that inequity by informing the committee that school bus drivers
employed by a school district cannot receive unemployment while
drivers employed by the private sector are eligible for
unemployment benefits.
Senator Lincoln indicated that the figures regarding the cost to
the school district seem to be overly exaggerated. In reality, a
small number of noncertified employees would apply for unemployment
compensation due to the small window of opportunity. Usually,
these noncertified employees are not working in the summer months
when jobs are available. She noted that in some cases employment
is not available or the person cannot obtain a job. In order to
receive unemployment, these persons must actively seek employment.
Single parent families seem to be having the most difficulty.
Senator Lincoln pointed out that the benefit is small which
eliminated the possibility of an incentive not to work. An
employee earning an average of $17,000 annually would receive $172
per week and $24 per dependent for a maximum duration of 11 weeks.
The majority of the employees that SB 2 would affect would probably
be permanent Alaskan residents who would spend their money locally.
She informed the committee that in 1992, Alaska paid $25.4 million
in benefits to those who had worked in Alaska but drew their
benefit outside.
Number 174
SENATOR LEMAN inquired as to the financial affect of SB 2 on the
system. SENATOR LINCOLN said that there is a zero fiscal note from
the Department of Education, but the figures are probably skewed.
SENATOR LEMAN asked if these people who are not allowed to receive
unemployment compensation were paying into the fund. SENATOR
LINCOLN clarified that these employees are paying into the fund,
but they cannot receive the benefit.
BILL MUNROE, representing the Classified Employees Association in
the Mat-Su Borough School District, explained that in Mat-Su the
school district pays a set percentage which may increase with
regards to the experience level of the employee. He urged the
committee to discuss the question of who is paying into the fund,
the employees or the school district, with the Department of Labor
or whomever administers the state unemployment insurance benefits.
Mr. Munroe informed the committee that at one time there was a
supplemental interim benefits program which, he recollected, was
discontinued due to the shortage of state revenues. In a survey of
the association's members, approximately 500, all wanted the
pursuit of unemployment benefits to be continued. The members
believe this to be an issue of equity. He said that internal
research has determined that possibly 350 term employees may
currently be eligible to apply for unemployment benefits. He
estimated that approximately 50 to 70 percent of those 350 eligible
employees would not apply for the benefits. Mr. Munroe mentioned
an inflated estimate for the costs to the Bush for this
legislation. He discussed the attempts to achieve retirement
equity for term employees which has been going on since 1979. Last
year, the association realized that the goal of retirement equity
for term employees was not going to materialize and perhaps, the
unemployment insurance issue would be an achievable goal. In
conclusion, Mr. Munroe asked for the committee's support of SB 2.
Number 266
CHAIRMAN GREEN asked how the employees contribution is calculated
currently. BILL MUNROE explained that the employee does not see
their contribution on their paychecks. The district pays the
contribution due to the low experience level in Mat-Su. Mr. Munroe
was unsure as to the procedure in other districts.
SHELIA PETERSON said that the Department of Education does support
SB 2. The department is concerned about the cost to school
districts. Ms. Peterson explained that she understood that
educational institutions are reimbursable entities, therefore the
Department of Labor would pay the unemployment insurance benefits
to the claimants and then bill the school districts quarterly for
the actual cost incurred. The Department of Labor has estimated
that there are approximately 3,800 noncertified individuals in
Alaska. The Department of Labor has also estimated, based on who
may apply for the benefits, that the school districts statewide may
incur approximately $2.1 million. Ms. Peterson said that the
Department of Education strongly supports SB 2, but some concerns
regarding the costs to the local school districts remain.
SENATOR LEMAN expressed concern with the financial integrity of the
program in light of the information Ms. Peterson had presented from
the Department of Labor. If people are not paying as much into the
system as is being drawn out, then there is a net draw on the
system.
SHELIA PETERSON explained that these would be reimbursable
arrangements; the trust fund would pay out the benefits then the
Department of Labor would bill each school district for the actual
cost. Therefore, the total amount of payments would be reimbursed.
SENATOR LEMAN inquired as to how much an employees deduction would
amount to over the course of the school year. SHELIA PETERSON
understood that there would not be an employee deduction. The
employer, the local school district, would pay the total amount.
SENATOR LEMAN asked if Ms. Peterson meant there is no deduction
from the employee or there is no additional deduction. SHELIA
PETERSON reiterated that the Department of Labor had explained to
her that currently, there is no deduction, the employer pays the
amount.
CHAIRMAN GREEN said that this point could be followed up and
clarified.
Number 329
SENATOR LINCOLN understood Mr. Munroe to say that Mat-Su had chosen
to pay for their employee contributions; that is not automatic.
SENATOR SALO indicated that Mat-Su may have chosen to pay for their
employee contributions due to the low usage of unemployment
compensation. She predicted that if that usage changed, the school
district would probably do an assessment of the employees as does
the private sector.
CHAIRMAN GREEN asked if there was anyone on teleconference that was
still connected.
BILL MUNROE informed the committee that Mat-Su was still on-line
and he wanted to make further comments regarding SB 2. He
specified that in Mat-Su there currently is no deduction from the
employees' paycheck, however that does not preclude that deduction
from occurring. Information from the Department of Labor may be
crucial in determining the overall costs. Mr. Munroe offered to
get information from the Department of Labor regarding the
possibility of a deduction and return it to the committee. He
informed the committee that his research so far has indicated that
everyone who is eligible for state unemployment insurance does pay
a deduction other than Mat-Su's employees and probably other
employees across the state who are school employees. Mr. Munroe
noted that Rose Smith would be faxing her written testimony.
Number 352
SCOTT BIDWELL, Executive Board of ESSA and President of the Sports
Staff Caucus, pointed out that employees covered under this bill
used to be 12 month employees, but they were cut back 9 and 10
months. Furthermore, many of the hours of these jobs have been cut
back from 7 1/2 hours to 7 hours. He said that typically, the 9
and 10 month jobs are at the lower end of the pay scale.
Uncertificated workers do not receive an employers retirement
credit, as do teachers, nor do they receive unemployment. Mr.
Bidwell indicated that these jobs had been cut because they were
the easiest jobs to cut. He echoed the sentiment that the
predicted costs for unemployment were inflated; most people in his
area have other jobs to go to during the interim. In conclusion,
Mr. Bidwell reiterated that unemployment was being sought since
retirement for these positions seems to be unattainable.
RICHARD LEATH, Superintendent of Schools for the Bristol Bay
Borough, was opposed to SB 2. Another unfunded mandate is not
needed, especially in this time of budget restraints. He
emphasized that he is attempting to save all the jobs possible in
his district. He explained that there is a possibility that jobs
may have to be eliminated in order to pay the unemployment.
Currently, employees under classified contracts are given contracts
in May and expect a job in the following Fall. This is not a good
bill for Bristol Bay at this time. He noted that Bristol Bay like
Mat-Su pays all the unemployment; this is not a major factor
because the incident rate in so low.
SENATOR SALO asked Mr. Leath if he could assess his employees
through an unemployment tax, if this legislation passes. RICHARD
LEATH replied yes, he preferred not to have to do that. SENATOR
SALO pointed out that if Bristol Bay did have to assess their
employees, then the financial impact Mr. Leath was concerned about
would be decreased. Mr. Leath agreed.
Number 419
VERNON MARSHALL, Executive Director of NEA-AK, supported SB 2. He
discussed the inequity in the treatment of noncertified employees
of school districts in comparison to the treatment of other state
employees in local and state government as well as within school
districts. In the early 1970s, the federal government made the
unemployment program available to school districts. All school
employees within a school district were eligible for unemployment
during the break between two academic years as well as during the
break between two successive semesters. He noted that in 1972 or
1973, practically every state denied benefits to school employees.
Mr. Marshall emphasized that the economic conditions since 1972
have changed in Alaska and across the country. Perhaps, the trends
of 1972 should be reviewed now. He discussed the previously
mentioned bus driver example in which school employed drivers are
not treated the same as privatized drivers. This inequity creates
a moral issue within the district. Mr. Marshall mentioned a 1992
actuarial study by the Unemployment System in which ways to deal
with unemployment from the perspective of the employee and employer
are discussed. The economic impact of unemployment could be dealt
with through the reimbursement of the unemployment trust fund for
actual use or the application of a tax or a combination of both.
The actuarial study pointed out that the unemployment program is an
insurance program not a social program.
Systems would review the use of the program and set up a receipt
system in order to deal with the use that employees experience
relative to the system itself. Mr. Marshall noted that was dealt
with through the cost benefit rates in the calculation of the ratio
of benefits paid out in comparison to the money coming in. That
cost can be passed on to the employee. He expressed concern with
the calculation because the Department of Labor has primarily
focused on calculating the cost of unemployment based on seasonal
work most of which occurs in the winter. In this case, a seasonal
winter rate is being applied to summer. Many of those who may
qualify for unemployment will not be eligible for the benefit or
they would have job opportunities for the summer.
Number 502
Mr. Marshall pointed out that the benefit would be small. In 1994,
a person who earned $17,000 annually would receive $172 per week in
unemployment as well as $24 per dependent. The maximum duration of
that benefit would probably not exceed 10 or 11 weeks. He
indicated that it would be difficult to live on $172 in Alaska in
the summer. Therefore, if a person has the choice of a job and
unemployment, the job seems to be the obvious choice because it
would pay more than $172 per week. Mr. Marshall informed the
committee that as high as 26 percent of Alaska's unemployment
benefits have been paid to out-of-state workers. If unemployment
is allowed for noncertified employees in the summer, these dollars
would remain in the local communities.
Mr. Marshall appreciated that the committee had considered SB 2 and
hoped that SB 2 would receive a good vote. Why are noncertified
school employees who are off in the summer different than seasonal
employees who are off in the winter? He felt that it was unfair
for noncertified employees to be denied the unemployment benefit.
He encouraged the committee to pass SB 2 out of committee and keep
the issue alive.
Number 538
SENATOR LEMAN discussed the testimony previous to Mr. Marshall's in
which two options regarding balancing the budget if SB 2 is passed.
The testimony indicated that passage of SB 2 would result in school
districts having to either decrease the number of employees or tax
the employees. Decreasing the number of employees results in few
people working while a tax on employees would result in a reduced
salary. Senator Leman felt that Mr. Marshall's support of SB 2 in
essence supported a mechanism that would reduce the number of
employees or reduce the compensation to the employees or both.
What other solution is there?
VERNON MARSHALL reiterated that the actual cost of SB 2 to a
specific district is difficult to calculate. He asserted that he
did not want to weaken the unemployment program of Alaska.
Exercising a tax on employees could cover the assumptions regarding
participation of the program, and adjustments can be made. The
benefit cost rate could decrease and result in a decrease in the
employee tax or the rate could increase. He emphasized that he was
not advocating the reduction of people working for a school
district in order to provide this benefit. Mr. Marshall said that
there are other avenues that would provide the unemployment benefit
and cover the cost. That could be determined on an annual basis
through the actuarial assumptions of the system. The cost benefit
rate is determined by prior year participation.
SENATOR LEMAN inquired as to what the other avenues Mr. Marshall
mentioned would be. VERNON MARSHALL stated that a tax would result
in the reduction of take home pay. SENATOR LEMAN interjected that
an increase in the tax on a salary is the same as a decrease in
that salary. MR. MARSHALL explained that the employee has gained
the opportunity to participate in an insurance program that covers
unemployment. The people that SB 2 speaks to are unemployed. We
all buy benefits for the future through taxes, for example, the
social security tax. Mr. Marshall reiterated that there are
options such as the reimbursement of the fund, employee tax, or a
combination of both.
Number 585
SENATOR LEMAN asserted that the reimbursement of the fund must come
from somewhere. Some people falsely assume that the reimbursement
comes from another source that just appears. Senator Leman
explained that the other source is the employee, the employer, or
the guardians of the treasury.
SENATOR LINCOLN stated that she would not move SB 2 along if it
means that employees are going to be cut; that is not her objective
in introducing SB 2. She clarified that the major factor is the
number of persons who are actually going to apply for the benefit.
She reiterated that the numbers are very high estimates.
TAPE 95-33, SIDE B
Number 594
SENATOR LINCOLN informed the committee that the prediction that
between 30 and 40 percent of noncertified employees are going to
apply for unemployment benefits is too high. She did not believe
that a huge amount of people would apply for the $172 per week
benefit. A combination of taxation of the employees as well as
having the school districts participate could be an option.
Senator Lincoln cautioned the committee in its review of the
inflated numbers from the Department of Labor. More realistic
figures need to be determined for summer employment and
specifically, for noncertified employees of the schools.
ALICE JOHNSON, Custodian at the Sterling School, supported SB 2.
She discussed the problems faced in obtaining employment in the
summer; many of the jobs are filled by college students.
Unemployment insurance is needed in the summer months. She
preferred retirement. She said that private business provides this
insurance and government should not exempt themselves from it.
JUSTIN GEORGE, Kenai Peninsula Educational Support Association,
said that the association supported SB 2. He reiterated the
inequity in state seasonal employees being eligible for
unemployment while school district employees are not. Borough,
assembly members, and school board members receive year for year
retirement which school district employees do not. Since
retirement equity seems not to be debatable anymore, the
association supports unemployment benefits.
Mr. George informed the committee that due to recent budget cuts,
some of the 12 month positions have been reduced to 10 month
positions. Those employees should be eligible for unemployment
benefits this year, but the next year is uncertain. He echoed Ms.
Johnson's concerns regarding the problems in finding work in the
summer. Furthermore, finding work can be difficult due to the
short amount of time these employees are off. Many people do find
work and Mr. George felt that only a small number of people would
apply for the benefit and the impact would be minimal. The benefit
is needed.
Number 557
BRUCE LUDWIG, Business Manager for the Alaska Public Employees
Association - Alaska Federation of Teachers, supported SB 2. He
expressed confusion regarding who contributes the .07 percent tax
and who does not. There is no question from his members that they
would be willing to pay that .07 percent in order to receive the
benefit.
SENATOR MILLER recommended that the Department of Labor be present
at the next hearing of this legislation. He emphasized that the
employer pays much more into the system than the employee. Senator
Miller informed everyone that in his business, his employees pay
.07 percent while he, the employer, pays 3.2 percent. Therefore,
there would be a cost to the districts. An employer pays for every
employee during the entire time they work; the employer pays 3.2
percent on the gross amount. The Department of Labor would be
helpful in clarifying this confusion.
SENATOR LEMAN clarified that the .07 percent is really 0.7 percent.
He said that percent the employee pays and the employer pays could
be close to 3.7 percent.
SENATOR MILLER agreed, but noted that the percentage varies with
respect to the industry.
CHAIRMAN GREEN expressed interest in reviewing the records of when
unemployment for noncertified employees was previously in place.
SENATOR SALO explained that when unemployment was previously in
place, it applied to both certified as well as classified.
Therefore, the statistics may be difficult to determine with
relevance to this bill.
CHAIRMAN GREEN noted that perhaps, unemployment was originally set
up with respect to long-term employment and therefore, the
actuarial data was collected with that in mind. Perhaps, seasonal
work and planned absence of two to three months was not planned in
the original unemployment program. That would prove difficult in
obtaining accurate information regarding unemployment for seasonal
employees.
BRUCE LUDWIG suggested that there are number of persons who take
advantage of unemployment who are seasonally employed.
CHAIRMAN GREEN reiterated the difficulty in finding applicable data
for this situation. She indicated the need to talk to her
district.
SENATOR SALO pointed out that a factor limiting the number of
people participating in unemployment would be the restriction that
a person must be unemployed for a specified length of time before
a person can apply for the benefit. VERNON MARSHALL explained that
there is a week long waiting period with the anticipation that the
person would be unemployed for an extended time.
SENATOR SALO felt that those who would apply for unemployment would
be those that are struggling to make ends meet and need this
benefit. She recalled that when she taught and unemployment was
available, most did not apply because of the waiting period and the
paperwork involved.
BRUCE LUDWIG interjected that an individual who has applied for
unemployment must be actively available for employment at the time
which could deter some from applying.
CHAIRMAN GREEN held SB 2 in order to gather more information.
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