Legislature(1997 - 1998)

04/25/1997 09:06 AM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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               SB 116 WELFARE TO WORK TAX CREDITS                             
                                                                              
  CHAIRMAN WILKEN  announced that  SB 116  was the next order of               
 business before the committee.                                                
                                                                               
 Number 402                                                                    
                                                                               
  JIM NORDLUND , Director of the Division of Public Assistance,                
 informed the committee that he was present to testify on the behalf           
 of the Administration in support of SB 116.  SB 116 will provide              
 tax credits to Alaska corporate employers who hire disadvantaged              
 workers.  Mr. Nordlund has a particular interest in SB 116 because            
 of the challenge of the division and the state as a whole to find             
 work opportunities for up to 4,000 individuals in the next year due           
 to state and federal mandates.  This is a multi-departmental                  
 effort.  Mr. Nordlund noted his work with the employer community to           
 review incentives for employers to hire welfare recipients and                
 SB 116 is a key to this goal.  Mr. Nordlund mentioned that a                  
 representative from the Department of Revenue and the Department of           
 Labor are present for questions regarding the respective                      
 departments.                                                                  
                                                                               
 SB 116 is modeled after federal legislation that provides a tax               
 credit on the federal income tax to businesses that hire welfare              
 recipients.  SB 116 would require a state tax credit of up to                 
 $1,000 per employee and an additional $500 if the employer provides           
 job training to the recipient.  The employee must be on the job for           
 180 days or 400 hours, and those need not be consecutive days which           
 recognizes the seasonal employment in Alaska.  Mr. Nordlund                   
 mentioned that the federal law and SB 116 are not limited to                  
 welfare recipients, but are available to other categories of                  
 disadvantaged workers.  For the number of employers who hire                  
 recipients, there is a significant cost savings in terms of welfare           
 benefits that would have otherwise been paid offsetting the cost to           
 the Treasury of providing that tax credit to employers.  Mr.                  
 Nordlund noted that SB 116 makes it as administratively simple for            
 employers as possible.                                                        
                                                                               
  SENATOR LEMAN  said that he liked the idea.  Senator Leman noted             
 that a few years ago, he introduced a welfare reform bill which               
 included a provision similar to the concept of SB 116.  Senator               
 Leman was concerned with limiting the tax credit to the corporate             
 income tax.  Perhaps, there is a way in which to broaden the base             
 to include more employers to participate in employing welfare                 
 recipients.  The number of corporate tax payers in Alaska is small            
 in comparison to the number of business licenses.                             
                                                                               
 JIM NORDLUND  recognized that SB 116 would only benefit Alaskan               
 corporations because corporations are the only businesses that pay            
 income taxes.  Mr. Nordlund emphasized that SB 116 is one of                  
 several incentives being utilized to encourage employers to hire              
 welfare recipients.  Mr. Nordlund informed the committee that a               
 program modeled after the Green Star program is being reviewed.               
 The Work Star program which recognizes businesses hiring                      
 disadvantaged workers or welfare recipients is also being reviewed.           
 Under SB 98 from last year, the actual welfare benefit can be used            
 as a wage subsidy to businesses not limited to corporations hiring            
 welfare recipients.  Mr. Nordlund pointed out that most who work              
 outside of government work for a corporation.  The bigger                     
 businesses who hire more are generally corporations.                          
                                                                               
  SENATOR LEMAN  inquired as to the numbers of employees hired by the          
 corporations covered under the corporate income tax versus the                
 total number of employees in Alaska.   JIM NORDLUND  said that could          
 be provided.                                                                  
                                                                               
 Number 489                                                                    
                                                                               
  SENATOR GREEN  inquired as to how the wage subsidy would work.   JIM         
 NORDLUND  explained that for a business, such as KMART, who pays $7           
 an hour and who hires a welfare recipient for six months to a year;           
 the business would receive $2 an hour.  The welfare benefit would             
 be utilized to subsidize $2 an hour of the wage.  Mr. Nordlund                
 pointed out that the program has been used in other states.  Due to           
 the combination of the residual benefit and the wage, the person              
 would do better than with the welfare benefit alone.  The employer            
 experiences a reduced payroll cost.  The wage subsidy is good for             
 the State Treasury because the needs of the family are being                  
 provided for partially through wages as opposed to 100 percent                
 through the welfare benefit.  Mr. Nordlund noted that the wage                
 subsidy will be placed in regulation by October 1997.                         
                                                                               
  SENATOR GREEN  asked if this would be part of the training component         
 or the work requirement.  How does this impact the two year and               
 five year time limit with regard to the individual's participation            
 in the tax credit?   JIM NORDLUND  said that presuming the individual         
 is working, the individual would not be subject to the two year               
 time limit which is the requirement for people to be in a job.  If            
 the job has a low wage and the individual is eligible for welfare,            
 the individual would receive a reduced benefit.  Between now and              
 five years, hopefully the individual would be at a point to support           
 themselves without any assistance.                                            
                                                                               
  SENATOR GREEN  asked if this could be construed to be a disincentive         
 to get off welfare.   JIM NORDLUND  did not think so.  This is                
 invisible to the recipient, except that employers would be willing            
 to hire the recipient.                                                        
                                                                               
  SENATOR LEMAN  asked if the Work Star program is a recognition               
 program and there is no money involved.   JIM NORDLUND  agreed that           
 the Work Star program is a recognition program that is being tested           
 with employers.  A steering committee of employers has been formed            
 in order to receive advice from employers.                                    
                                                                               
  SENATOR LEMAN  encouraged Mr. Nordlund to recognize businesses who           
 help programs such as Bootstraps which is designed to move folks              
 from welfare to work.                                                         
                                                                               
 Number 539                                                                    
                                                                               
  JOSEPH FRIEDMAN , Director of the Trade Dollar Exchange, informed            
 the committee that he represented about 100 small businesses in               
 Alaska.  The Trade Dollar Exchange is a program allowing small                
 businesses to actively participate in the hiring of persons through           
 trade.  Mr. Friedman pointed out that the Tax Equity & Fiscal                 
 Responsibility Act of 1982 said that trading or bartering must be             
 declared as income, but businesses can deduct the income as it is             
 spent for business expenses.  The Trade Dollar Exchange provides a            
 forum for low income persons to trade skills amongst each other and           
 are awarded trade dollars.  With those trade dollars, the                     
 individual can go to participating businesses and redeem the trade            
 dollars for goods and services.  For example, the People Mover in             
 Anchorage will provide bus passes for trade dollars.  The YMCA is             
 part of the Trade Dollar Exchange.  The Trade Dollar Exchange is a            
 debit-credit banking system.  Mr. Friedman noted that the Trade               
 Dollar Exchange comes from the Time Dollar Programs.  In St. Louis,           
 the largest Time Dollar Program has over 8,000 people trading                 
 skills.  If those 8,000 people participated 10 hours a week, that             
 results in 80,000 of hours of services delivered without asking for           
 money from the government.  If those hours were paid at $10 an                
 hour, that would result in $800,000 in savings.  Mr. Friedman noted           
 that in Michigan and Missouri, the state has paid for services that           
 cannot be provided by the system itself.                                      
                                                                               
 Mr. Friedman said that the Trade Dollar Exchange makes Alaskan                
 businesses more competitive and profitable.  Businesses can                   
 employee these people using trade dollars.  This program allows the           
 private industry group to present the program to small businesses             
 and enlist support.  SB 116 is important in that it moves                     
 corporations into the arena.  Mr. Friedman noted that the Trade               
 Dollar Exchange had contacted the Democratic and Republican State             
 Parties and inquired as to donations of time and skill.                       
                                                                               
  TAPE 97-43, SIDE B                                                           
                                                                               
 Mr. Friedman stated that the program is looking for the                       
 opportunity, amendment to SB 116, to have the trade dollars be                
 disregarded for income analysis for AFDC, ATAP and SSI.                       
                                                                               
                                                                               
  SENATOR LEMAN  asked if there are other similar exchange programs in         
 Alaska.  If so, why would those programs not be eligible for income           
 disregard as Mr. Friedman suggested for the Trade Dollar Exchange.            
  JOSEPH FRIEDMAN  explained that exchanges work by a profit                   
 incentive.  Moving low income people from welfare to work does not            
 appeal to many.  Mr. Friedman pointed out that the Trade Dollar               
 Exchange is a program that offers training in order that people               
 would come in for four of the six weeks and become part of a                  
 community and then move to a job.  Within the trading industry many           
 do not view this as a business opportunity.                                   
                                                                               
 Number 561                                                                    
                                                                               
  PAM LABOLLE , Alaska State Chamber of Commerce, informed the                 
 committee that the chamber represents about 700 employers and                 
 businesses statewide who support SB 116.  SB 116 would encourage              
 businesses to hire persons without current experience and would               
 alleviate some of the on the job training costs.  Ms. LaBolle                 
 believed that the costs of on the job training is a major deterrent           
 for hiring persons on the welfare rolls.                                      
                                                                               
  SENATOR LEMAN  inquired as to how many of the 700 members of the             
 chamber were corporate taxpayers.   PAM LABOLLE  said that she could          
 survey the members.  Ms. LaBolle believed that at a recent chamber            
 breakfast, Mike Abbott indicated that about 3,500 corporations pay            
 corporate taxes in Alaska.  A huge percentage of that is paid by 11           
 corporations.  SB 116 is an opportunity to join in a partnership              
 with the state and there is an incentive to do so.                            
                                                                               
  SENATOR LEMAN  asked Ms. LaBolle how she viewed expanding this to            
 other costs that businesses incur such as fuel taxes and business             
 license fees to those that are employers, but are not corporate tax           
 payers.   PAM LABOLLE  believed that could be explored amongst the            
 membership of the chamber.  The cost-benefit relationship may be an           
 obstacle.                                                                     
                                                                               
  SENATOR WARD  asked if the chamber has a position on carrying the            
 credit for 2-3 years.   PAM LABOLLE  replied no.                              
                                                                               
  CHAIRMAN WILKEN  stated that he would like to move SB 116 to Senate          
 Finance.                                                                      
                                                                               
  SENATOR GREEN  moved to report SB 116 out of committee with                  
 individual recommendations and accompanying fiscal notes.  Without            
 objection, it was so ordered.                                                 

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