Legislature(1997 - 1998)
04/25/1997 09:06 AM Senate HES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
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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