Legislature(2009 - 2010)BUTROVICH 205

03/31/2009 01:00 PM LABOR & COMMERCE

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Audio Topic
01:08:00 PM Start
01:10:29 PM Governor's Appointments
01:13:09 PM SB170
01:43:05 PM SB60
02:27:07 PM SB149
02:58:44 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time & Location Change --
+ Confirmation of Governor's Appointments TELECONFERENCED
Heard & Held
Heard & Held
Moved SB 170 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
          SB 170-UNEMPLOYMENT AMENDMENTS: FED STIMULUS                                                                      
1:13:09 PM                                                                                                                    
CHAIR PASKVAN announced the consideration of SB 170.                                                                            
SENATOR DAVIS joined the committee.                                                                                             
SENATOR  ELLIS,  sponsor  of  SB 170,  thanked  the  Alaska  State                                                              
Chamber of  Commerce and  the National  Federation of  Independent                                                              
Business (NFIB) for  their work on making this  bill as beneficial                                                              
as possible.                                                                                                                    
He explained  that the bill  represents a  small change in  the UI                                                              
eligibility  standards in  the  State of  Alaska  even though  the                                                              
state  has modernized  its UI system  already.  This is one  minor                                                              
change that would  bring great benefits to some  unemployed people                                                              
and has no strings attached.                                                                                                    
He  explained  that  current  eligibility   is  based  on  meeting                                                              
minimum  earnings  in  the  first  four  of  the  five  previously                                                              
completed quarters.   SB 170  gives workers  who do not  meet that                                                              
qualification  the option  of recalculating  using their  earnings                                                              
from the  last four completed  quarters. This would  benefit about                                                              
1,300 people who  would otherwise become eligible  for UI payments                                                              
three months  later by  eliminating the  three-month lag  time. If                                                              
this policy  had been in place in  2008 it would have  provided $8                                                              
million  in benefits.  The  really  good news,  too,  is that  the                                                              
federal stimulus  dollars  fully fund this  minor change  bringing                                                              
in  $17 million  for  job training  as well  as  enhancing the  UI                                                              
trust  fund. If  some money  is deposited  in the  UI trust  fund,                                                              
there would be no  impact to business taxes. That  is why the NFIB                                                              
and the State Chamber think this is a good opportunity.                                                                         
The  Department of  Labor and  Workforce  Development (DOLWD)  and                                                              
Representative Hawker's  office are taking  the lead on  the exact                                                              
amount. The department  has not taken a position on  the bill, but                                                              
has been very  helpful and professional in representing  the Palin                                                              
Representative  Hawker thinks  between $3  million and $5  million                                                              
needs to  go into the  UI trust fund  that currently is  more than                                                              
solvent with a $350 million balance.                                                                                            
1:17:28 PM                                                                                                                    
He  said  that these  are  one-time  dollars  and that  Alaska  is                                                              
already  experiencing the  highest unemployment  in a  generation;                                                              
it may feel the  effects of the national and  world-wide recession                                                              
even  more later  this  year. Alaska  is  also  preparing for  the                                                              
largest infrastructure  project in U.S. history with  the gasline.                                                              
There  is a  perfect  confluence  of events  that  gives Alaska  a                                                              
perfect opportunity  to use  federal dollars  allocated to  Alaska                                                              
for a  targeted and timely  expansion of  job training. This  is a                                                              
reasonable  act  to take  and  has  a net  gain  on two  or  three                                                              
He  said this  bill comes  out of  the intent  of the  legislative                                                              
leaders of  both bodies  and both parties  to closely  examine all                                                              
available stimulus  dollars and accept only those  that make sense                                                              
for Alaska in the long term.                                                                                                    
1:19:04 PM                                                                                                                    
MAX  HENSLEY,  staff  to  Senator  Ellis, said  the  bill  is  one                                                              
section; it  gives unemployed  workers the option  if they  do not                                                              
qualify  for unemployment  insurance  based on  their earnings  to                                                              
recalculate  them using the  most recent  four completed  calendar                                                              
quarters rather than  the first four quarters of  their last five.                                                              
It takes  effect on  January 1,  2010. He  informed them  that the                                                              
DOLWD generally  calculates unemployment  insurance benefits  on a                                                              
calendar year rather than a fiscal year basis.                                                                                  
He said  a number of  states are  concerned that the  unemployment                                                              
insurance modernization,  which actually  totals about  $7 billion                                                              
in  incentive  money  from the  federal  stimulus  package,  would                                                              
require significant  expansions  to eligibility requirements,  but                                                              
the federal stimulus  makes the pot of money that  is allocated to                                                              
each state dependent  on two sets of criteria. The  first third of                                                              
the money is  available to states that offer  the alternative base                                                              
period, which Alaska  currently does not and SB  170 will provide.                                                              
The second  two-thirds of the stimulus  money is based  on a state                                                              
offering UI benefits  to unemployed workers who are  members of at                                                              
least two  of the  following four  categories: part time  workers,                                                              
workers who are  enrolled in training programs,  workers who leave                                                              
their jobs for  compelling family reasons and  additional benefits                                                              
for workers with dependents.                                                                                                    
1:21:15 PM                                                                                                                    
Alaska  already meets  the final  two categories;  if we make  the                                                              
change  to  become  eligible  for the  initial  one-third  of  the                                                              
money,  we will  get the  full pot  of money  without any  further                                                              
changes. The  reason this is a big  issue in other states  is that                                                              
they would  have to make all the  changes at once and  those could                                                              
be substantial for some.                                                                                                        
1:21:50 PM                                                                                                                    
MR. HENSLEY said  another concern is that usually  an expansion of                                                              
benefits  expands  employer/employee  contributions to  the  trust                                                              
fund, but Alaska's  UI trust fund is one of the  healthiest in the                                                              
nation  with  a  balance  of  about  $350  million  in  2008.  The                                                              
additional  monies in the  stimulus package  are more  than enough                                                              
to cover this small addition in liability.                                                                                      
1:22:24 PM                                                                                                                    
A third  major question  that people  have asked  is whether  this                                                              
change  would  expose  the  state   to  a  permanent  and  ongoing                                                              
liability.  It  has  been  found  that  nothing  in  the  stimulus                                                              
provides that  states can't change  their laws back at  some point                                                              
in  the   future,  but  it   can't  be  explicitly   temporary  or                                                              
sunsetted.  A  letter   from  the  federal  Department   of  Labor                                                              
certified that there are "no claw back provisions."                                                                             
1:23:04 PM                                                                                                                    
The additional  money beyond  what is  needed to  shore up  the UI                                                              
trust  fund could  be used  for increased  administration and  job                                                              
training,  although  the  department  feels  it  doesn't  need  to                                                              
increase administration.                                                                                                        
He noted also that  this is a one-time grant, and  after the money                                                              
goes into the  UI trust fund it  can be appropriated by  the state                                                              
without an end  date, unlike many other stimulus  funds which must                                                              
be spent  over the  next year or  two. The  state could  choose to                                                              
space  this  money  out  more  widely,   and  no  state  match  is                                                              
MR. HENSLEY said  the funds have already been  appropriated by the                                                              
federal government  and funds  we do  not accept  will be  sent to                                                              
another  state  to either  benefit  their  job training  or  their                                                              
unemployed workers.                                                                                                             
1:24:59 PM                                                                                                                    
SENATOR  THOMAS asked  him to review  the criteria  again  on what                                                              
would be new.                                                                                                                   
MR.  HENSLEY said  there are  two  pots of  money within  Alaska's                                                              
portion  of the  UI modernization  incentive. The  first third  is                                                              
contingent  on the  acceptance  of  the alternative  base  period,                                                              
which  it  outlined  in  this  bill.   The  second  two-thirds  is                                                              
contingent on  the state offering UI  benefits to at least  two of                                                              
the  four categories:  part  time  workers, extended  benefits  to                                                              
workers who are  enrolled in training programs,  workers who leave                                                              
their  jobs for  compelling  personal  reasons, and  the  expanded                                                              
benefits for workers  who have dependents. Alaska  meets the final                                                              
two  criteria  and  would  not need  to  change  its  statutes  to                                                              
receive  the second  two-thirds of  the money.  However we  cannot                                                              
receive the second two-thirds unless we receive the first third.                                                                
SENATOR  THOMAS  asked  if  the department  would  testify  or  be                                                              
available for questions.                                                                                                        
1:27:45 PM                                                                                                                    
PAULA  SCAVARA,  Special  Assistant/Legislative   Liaison  to  the                                                              
Department of Transportation  and Public Facilities  (DOTPF), said                                                              
she brought  a couple  of department  people to answer  questions,                                                              
Tom Nelson and James Wilson.                                                                                                    
JAMES   WILSON,   Economist,  Research   and   Analysis   Section,                                                              
Department   of   Labor   and   Workforce   Development   (DOLWD),                                                              
introduced   himself  and   said  he  was   available  to   answer                                                              
1:29:53 PM                                                                                                                    
SENATOR BUNDE  asked why the  department hadn't done  this already                                                              
if it's  such a  good idea,  and "before  we were  bribed by  this                                                              
money." He  was concerned that  if we make  this change  the extra                                                              
$2  million  would  likely  be an  ongoing  cost,  and  after  the                                                              
stimulus money  goes away,  that would be  a continuing  impact on                                                              
the program.                                                                                                                    
TOM   NELSON,   Director,   Division   of   Employment   Security,                                                              
Department of  Labor and  Workforce Development (DOLWD),  answered                                                              
that they  calculated an actual  number of 1,293  individuals that                                                              
otherwise would  have been eligible  for benefits in 2008.  Of the                                                              
$1.9 million  impact to  the trust  fund, 26  percent is  borne by                                                              
the actual  worker. If approximately  $3 million would be  left in                                                              
the trust  fund, the  trust fund  solvency factor  would cover  at                                                              
least the first year of the costs in the years outgoing.                                                                        
1:31:37 PM                                                                                                                    
SENATOR BUNDE asked about putting a sunset on this.                                                                             
MR.  NELSON  replied that  18  states  already have  this  program                                                              
before  the stimulus  package came  out, and  some of  them had  a                                                              
sunset provision.  The federal  guidance  is that they  understand                                                              
the ability  of state  legislatures to change  laws after  this is                                                              
over with  and they only require  a certification that  the states                                                              
are acting on good faith.                                                                                                       
SENATOR BUNDE  commented that  the feds  might not understand  the                                                              
politics behind trying to change unemployment benefits.                                                                         
1:32:42 PM                                                                                                                    
SENATOR  BUNDE remarked  that one  of the bones  of contention  in                                                              
changing UI in Alaska  has always been that workers  who are fired                                                              
for cause can claim UI insurance, and this doesn't change that.                                                                 
MR. NELSON  replied that  is correct,  but he  added that  they go                                                              
through a six-week waiting period.                                                                                              
1:33:24 PM                                                                                                                    
SENATOR THOMAS asked the department's position.                                                                                 
MS.  SCAVARA replied  the  department  and the  administration  is                                                              
SENATOR  THOMAS asked  in that case  if the  attached zero  fiscal                                                              
note goes  out to  only 2015 or  to a point  beyond that  when the                                                              
federal money is gone.                                                                                                          
1:34:15 PM                                                                                                                    
MR.  NELSON  explained  that  the  fiscal  note  is  zero  because                                                              
regardless  of how  many claims  they process  throughout a  year,                                                              
the  workload  actually  dictates   what  the  federal  government                                                              
reimburses back  to the  state. He couldn't  speculate on  why the                                                              
fiscal note only goes out to 2015.                                                                                              
MS. SCAVARA  added that the  form goes to  2015, so they  just put                                                              
zeros across.                                                                                                                   
SENATOR   THOMAS  asked   if  the  department   agreed  with   the                                                              
explanation from Senator Ellis' staff.                                                                                          
1:35:03 PM                                                                                                                    
MR. NELSON replied yes.                                                                                                         
1:35:33 PM                                                                                                                    
SENATOR  BUNDE said  he  is stuck  on  the idea  that  calculating                                                              
eligibility for more  than 1,300 people seems like  a fairly minor                                                              
technicality,  but he  was curious  about why  the department  did                                                              
not  choose to  do that  in the  first  place. Would  there be  an                                                              
economic impact?                                                                                                                
MS.  SCAVARA  responded  that  UI   eligibility  would  require  a                                                              
statutory change,  and she  has worked at  the department  for six                                                              
years and has not heard of it being brought up.                                                                                 
1:36:39 PM                                                                                                                    
DENNY  DEWITT,  National  Federation   of  Independent  Businesses                                                              
(NFIB), supported  SB 170. They  worked hard with  the department,                                                              
legislators, staff  and consultants on  this issue in  the federal                                                              
arena to unwind  all the requirements particularly  whether or not                                                              
the expanded  benefits changed  the character  of the  program and                                                              
what  the impact  on premiums  would  be. And  they are  satisfied                                                              
that  the deposits  via  the Finance  committees  will offset  the                                                              
costs quite a ways into the future.                                                                                             
In terms  of change in  the base period  and how ongoing  benefits                                                              
are  paid,  they have  been  assured  that  the character  of  the                                                              
program  will remain  intact.  He thanked  Senator  Ellis and  his                                                              
staff for their work and help.                                                                                                  
1:39:44 PM                                                                                                                    
CHAIR PASKVAN  closed public testimony.  He observed that  this is                                                              
the type of bill  that deserves the support of  this committee and                                                              
added that the business community supports it.                                                                                  
1:40:15 PM                                                                                                                    
SENATOR THOMAS moved  to report SB 170, version  E, from committee                                                              
with  individual  recommendations  and  attached  fiscal  note(s).                                                              
There were no objections and it was so ordered.                                                                                 

Document Name Date/Time Subjects
Governor's Appointments.pdf SL&C 3/26/2009 1:30:00 PM
SL&C 3/31/2009 1:00:00 PM
CSSB 149 version E.pdf SL&C 3/31/2009 1:00:00 PM
SB 149
SB 149 Bill Packet.pdf SL&C 3/19/2009 1:30:00 PM
SL&C 3/31/2009 1:00:00 PM
SB 149
SB 60 Bill Packet.pdf SL&C 3/24/2009 1:30:00 PM
SL&C 3/31/2009 1:00:00 PM
SL&C 4/16/2009 1:00:00 PM
SB 60
SB 170 Bill Packet.pdf SL&C 3/31/2009 1:00:00 PM
SB 170