Legislature(1995 - 1996)
04/26/1995 09:10 AM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.