Legislature(2003 - 2004)

05/19/2003 08:03 AM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
           HB 305-UNEMPLOYMENT COMPENSATION BENEFITS                                                                        
                                                                                                                                
VICE CHAIR SEEKINS announced HB 305 to be up for consideration.                                                                 
                                                                                                                                
REPRESENTATIVE TOM  ANDERSON, sponsor  of HB 305,  explained that                                                               
the  bill  provides  an  8.12% increase  to  the  maximum  weekly                                                               
unemployment benefit  amount. This increase would  be phased over                                                               
a  three-year  period  and minimizes  the  impact  to  employers,                                                               
employees and the  UI trust fund. He introduced  the bill because                                                               
Alaska ranks 47th in the nation  with a maximum weekly benefit of                                                               
$248.  With   the  changes   in  the   bill,  Alaska   will  rank                                                               
approximately  28th in  the nation.  The fully  increased maximum                                                               
benefit amount  would be available  to claimants  earning $34,250                                                               
or more  per year. The  full impact  of the increase  in benefits                                                               
will not  be reflected  in employer tax  rates until  2010, which                                                               
was a  concern in the  House. When  the cumulative impact  of the                                                               
costs is included in a tax  rate calculation by 2010, the average                                                               
employer tax rate will increase  by .17% and the average employee                                                               
tax rate will only increase by .04%.                                                                                            
                                                                                                                                
COMMISSIONER  GREG O'CLARAY,  Department  of  Labor, pointed  out                                                               
that the amount  of money that goes into the  state's economy per                                                               
year  (for   2002)  was  nearly  $127   million  in  unemployment                                                               
insurance checks.  In the North  Star Borough,  $13,719,440 worth                                                               
of  unemployment checks  were cashed  in 2002.  In the  Anchorage                                                               
Mat-Su  area,  $55  million  goes into  the  local  economy.  The                                                               
increase they  are looking at  only affects about 3.28%  of those                                                               
that actually collect benefits within the state. He noted:                                                                      
                                                                                                                                
     I think that's important  for you to underscore because                                                                    
     you'll  hear  those  who  oppose  this  bill  and  this                                                                    
     increase...because   employers    cannot   stand   this                                                                    
     increase.  Believe me,  this is  a compromise  piece of                                                                    
     legislation...                                                                                                             
                                                                                                                                
He said this  bill moves the effective date to  January 1 of each                                                               
year and  that assists employers  in adjusting costs in  terms of                                                               
their taxes. It will not have  any effect in FY04 and the maximum                                                               
it will cost per employee in 2005 is $5 per year.                                                                               
                                                                                                                                
COMMISSIONER O'CLARAY said:                                                                                                     
                                                                                                                                
     We  are  mainly  concerned about  keeping  our  skilled                                                                    
     workers  in  Alaska and  we're  starting  to lose  them                                                                    
     because they cannot afford  to maintain their residency                                                                    
     in Alaska  during the slow-down  in work in  the winter                                                                    
     when they  would draw  their UI  benefits and  they are                                                                    
     migrating to other portions of  the United States where                                                                    
     the cost of living is  cheaper. That is a major problem                                                                    
     for the construction industry because,  if we are - and                                                                    
     this  governor has  indicated he  wants  to build  some                                                                    
     roads - and  I support that - we're going  to be seeing                                                                    
     some heavy  construction. We  need those  craftsmen in-                                                                    
     state -  because the other  concern our  department has                                                                    
     is  with respect  to the  amount of  non-residents that                                                                    
     come to  Alaska that  work in our  high paying  jobs in                                                                    
     the construction  industry. Those dollars all  go south                                                                    
     and so it's our goal  in the department to increase the                                                                    
     amount of resident  workers and to not  only build, but                                                                    
     maintain  our  resident work  force  in  Alaska. So,  I                                                                    
     would encourage the committee to move this bill.                                                                           
                                                                                                                                
SENATOR  FRENCH asked  how  they  will put  off  the increase  of                                                               
benefit costs and keep them  from being reflected in employer tax                                                               
rates until 2010.                                                                                                               
                                                                                                                                
MR.  PATRICK  SHIER,  Chief, Employment  Security  Tax  Division,                                                               
explained that  the whole  rating system  is a  look-back system.                                                               
When rates are set  for 2004, they look back at  half of 2003 and                                                               
prior.                                                                                                                          
                                                                                                                                
SENATOR FRENCH said this bill has  a three-year phase in at 2003.                                                               
He thought  the whole  increase would  be phased  in by  2006 and                                                               
asked if it will use a four-year look-back period.                                                                              
                                                                                                                                
MR. SHIER  added that  there is  also a  mechanism in  the rating                                                               
system  that  depresses  any  called-for  increase  by  using  an                                                               
average  of the  prior three  years. He  surmised, "So,  the full                                                               
effect,  yes, is  not expected  to  be fully  represented in  the                                                               
rating process until 2010."                                                                                                     
                                                                                                                                
SENATOR FRENCH  asked if  this is  the way  most UI  programs are                                                               
administered in other states.                                                                                                   
                                                                                                                                
MR. SHIER replied that they are everywhere. He told members:                                                                    
                                                                                                                                
     For   example,  in   1985-87,  we   were  having   some                                                                    
     difficulty  here in  the state  of Alaska  and employer                                                                    
     rates did  not go up  until we had actually  turned the                                                                    
     corner and begun  to come out of there  because of this                                                                    
     statutory  rating  process   that  takes  a  three-year                                                                    
     average.                                                                                                                   
                                                                                                                                
VICE CHAIR  SEEKINS asked where  the money comes from  that comes                                                               
out in  UI benefits. He questioned,  "Doesn't it come out  of the                                                               
economy before it goes back into the economy?"                                                                                  
                                                                                                                                
COMMISSIONER O'CLARAY replied yes and explained:                                                                                
                                                                                                                                
     Obviously, 80% of the rate  comes out of the employer's                                                                    
     pocket  and  20%  of  the  UI  tax  comes  out  of  the                                                                    
     employee's.                                                                                                                
                                                                                                                                
VICE CHAIR SEEKINS responded:                                                                                                   
                                                                                                                                
     As an  employer, I  tell you  it all  comes out  of the                                                                    
     employee's pocket. It comes out  of his pocket, because                                                                    
     if I wasn't paying it in,  I'd be giving it to him more                                                                    
     than likely. It  would be negotiable for  him. It's his                                                                    
     money.                                                                                                                     
                                                                                                                                
He added that he thought  the construction industry had been that                                                               
way historically  in Alaska  but is probably  better now  than it                                                               
ever was  in the past because  of new technology. He  pointed out                                                               
he has  seen buildings being built  in tents in Anchorage  in the                                                               
wintertime.  When he  worked in  construction, workers  were laid                                                               
off in the wintertime.                                                                                                          
                                                                                                                                
COMMISSIONER O'CLARAY  responded that there have  been good years                                                               
in  construction and  this  looks like  another  good year.  With                                                               
highway construction, there could be even better years. He said:                                                                
                                                                                                                                
     The  main   impact,  though,  is  not   necessarily  on                                                                    
     construction trades.  The service industry is  one that                                                                    
     gets hit  very heavily, especially in  tourism, because                                                                    
     of the seasonality of that type of work.                                                                                   
                                                                                                                                
SENATOR STEVENS  commented that  Alaska would  be ranked  28th in                                                               
2006,  but   that's  assuming  no   other  states   change  their                                                               
unemployment rates.                                                                                                             
                                                                                                                                
MR.  SHIER explained  the differences  in the  charts before  the                                                               
committee and said there would  be some movement in the rankings.                                                               
It  is not  an  absolute  scale. He  did  not include  dependents                                                               
allowance in the calculations.                                                                                                  
                                                                                                                                
VICE CHAIR SEEKINS asked if  they are talking about families with                                                               
dependents allowance.                                                                                                           
                                                                                                                                
COMMISSIONER  O'CLARAY  responded  that   there  is  a  dependent                                                               
allowance of $24  per week per dependent with a  maximum of three                                                               
paid to claimants.                                                                                                              
                                                                                                                                
MR. DON ETHERIDGE, AFL-CIO, supported HB 305.                                                                                   
                                                                                                                                
VICE CHAIR SEEKINS said that years  ago, an operator made more on                                                               
an  Alaska job  than  elsewhere because  they  knew they  weren't                                                               
going  to have  that employment  in the  wintertime. He  asked if                                                               
that is still the case.                                                                                                         
                                                                                                                                
MR.  ETHERIDGE  replied  that  is   still  the  case,  but  "It's                                                               
tightening up more all the time."                                                                                               
                                                                                                                                
MS.  PAM LABOLLE,  President, Alaska  State Chamber  of Commerce,                                                               
said  this  bill  is  a  compromise  of  another  bill  that  was                                                               
introduced  and discussed  two years  ago. The  Chamber supported                                                               
the first step  then, of $24 and halfway with  the second step (a                                                               
12%  increase from  what the  bill  is proposing  now). Almost  a                                                               
third of the  UI payments were at the maximum  amount in 2001 and                                                               
nearly half included some dependent  allowance. Eleven percent of                                                               
claimants were paid the full dependent allowance.                                                                               
                                                                                                                                
MS. LABOLLE reminded the committee  that there was also a minimum                                                               
wage increase last year and  an increase in business license fees                                                               
that would  impact employers  as well. She  said further  that 16                                                               
states have a  rule that if you're unemployed during  the time of                                                               
your seasonal work, that's when  you can collect benefits, but if                                                               
you  are unemployed  out of  season for  that seasonal  work, you                                                               
can't receive  benefits. She stated,  "Alaska is very  lenient in                                                               
that they  pay unemployment insurance  benefits when the  kind of                                                               
work you do isn't even available."                                                                                              
                                                                                                                                
She encouraged  the committee to get  a full picture of  what the                                                               
full  cost  is  both  to  the tax  rated  employers  and  to  the                                                               
reimbursable  employers before  they pass  this legislation.  She                                                               
said it would  immediately impact the state's  budget and thought                                                               
taking it half  way would still have Alaska in  the upper quarter                                                               
of the maximum weekly benefit amount compared to other states.                                                                  
                                                                                                                                
VICE CHAIR  SEEKINS asked Commissioner O'Claray  about the fiscal                                                               
impact  of the  change on  the  state treasury.  One fiscal  note                                                               
indicated   zero,   which   he   thought  meant   the   cost   of                                                               
administration of the  program would not increase as  a result of                                                               
a change in the rate.                                                                                                           
                                                                                                                                
COMMISSIONER O'CLARAY said that was correct.                                                                                    
                                                                                                                                
VICE CHAIR SEEKINS  asked if there was an estimate  of the impact                                                               
a change would have on the treasury.                                                                                            
                                                                                                                                
COMMISSIONER  O'CLARAY replied  that  the bill  that didn't  pass                                                               
last  year or  the  year  before had  an  increase  on the  first                                                               
increment of $175,000 to the state  for FY03. That was for half a                                                               
year. He  explained, "If  you follow  that number,  your increase                                                               
for 12 months in 2004 would  be under $300,000. He questioned the                                                               
correctness of Ms. LaBolle's figures for the Alaska Railroad.                                                                   
                                                                                                                                
He said  he was  trying to  avoid getting  into an  argument with                                                               
advocates from the  Chamber of Commerce, because in  the 38 years                                                               
he had  been coming  before this legislature,  he had  never once                                                               
seen the Alaska  State Chamber of Commerce agree  to any increase                                                               
in benefits to workers.                                                                                                         
                                                                                                                                
VICE CHAIR SEEKINS asked Ms.  LaBolle if the information from the                                                               
Alaska Railroad  Corporation information was correct  and said if                                                               
it is, then a fiscal note should reflect that.                                                                                  
                                                                                                                                
COMMISSIONER  O'CLARAY responded  that  is correct,  but he  also                                                               
knew of  the game that is  played with fiscal notes.  He stuck by                                                               
the numbers he had just quoted.                                                                                                 
                                                                                                                                
MS.    BARBARA   HUFF-TUCKNESS,    Director,   Legislative    and                                                               
Governmental  Affairs for  Teamsters Local  959, said  during the                                                               
last  20 years,  unemployment  insurance  has actually  increased                                                               
four times. The last time was in 1997. She said:                                                                                
                                                                                                                                
     I would like to reiterate on  record that we are one of                                                                    
     three  states  that  actually  has  employees  that  do                                                                    
     contribute  along  with  employers to  this  particular                                                                    
     benefit  program. Additionally,  I would  also like  to                                                                    
     reiterate that  it is a partial  wage reimbursement. It                                                                    
     does benefit  those workers who are  in the unfortunate                                                                    
     situation of  being unemployed temporarily -  that they                                                                    
     can have  a partial  wage benefit that's  going towards                                                                    
     covering  those  life  necessities out  there  such  as                                                                    
     shelter,  utilities,  food   and  clothing,  which,  of                                                                    
     course, does go back into the business community.                                                                          
                                                                                                                                
She said that  sometimes workers don't plan to  be unemployed and                                                               
having a  benefit designed  to protect them  during that  time is                                                               
something she wanted the legislature  to support. For the record,                                                               
she was a  participatory member of the quasi-task  force that had                                                               
six  meetings  over  the  last  two  or  three  months  prior  to                                                               
introduction  of this  legislation  and there  is strong  support                                                               
from  AGC,  VECO  and  others.  She reiterated  that  this  is  a                                                               
compromise  bill  and   is  not  the  one  they   wanted  to  see                                                               
introduced, but they are supportive of it.                                                                                      
                                                                                                                                
MR.  RON PECK,  President,  Alaska  Travel Industry  Association,                                                               
said the vast majority of  the businesses he represents are small                                                               
and have  had a challenging  last season. The prospects  for next                                                               
year are not much better. He  noted, "All sectors of our business                                                               
are in a  state of decline." He said that  labor costs comprise a                                                               
significant  portion of  their business  operations and  they are                                                               
facing  an increasing  minimum wage.  These are  very challenging                                                               
times for Alaskan  tourism. He thanked them  for this opportunity                                                               
to speak.                                                                                                                       
                                                                                                                                
VICE  CHAIR SEEKINS  said  the last  time  this legislation  came                                                               
through  it had  a  fiscal  note and  this  time  it doesn't.  He                                                               
announced an  at-ease to  find out  what the  leadership's intent                                                               
was.                                                                                                                            
                                                                                                                                
9:40 to 9:56 a.m. - at ease                                                                                                     
                                                                                                                                
VICE-CHAIR SEEKINS  said that a  fiscal note was needed  and that                                                               
they  would hold  the bill  in committee  until the  commissioner                                                               
prepared it for them.                                                                                                           
                                                                                                                                
TAPE 03-38, SIDE A                                                                                                            
                                                                                                                              
SENATOR FRENCH asked if this  bill has a Senate Finance Committee                                                               
referral.  He  suggested  in  the   interest  of  efficiency  the                                                               
committee send the bill there to wait for the fiscal note.                                                                      
                                                                                                                                
VICE  CHAIR SEEKINS  said leadership  preferred that  it stay  in                                                               
this committee.  There being no  further business to  come before                                                               
the committee, he adjourned the meeting at 10:00 a.m.                                                                           

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